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First Quarter Outlook Has Alabama Economy Improving Moderately in 2012
Alabama 2012 Economic Forecast Released at Annual ConferenceBusiness Confidence Index™
Executive Summary––First Quarter 2012 Alabama Business Confidence Index™
UA Experts on Gulf of Mexico Oil Spill
Alabama Forecast Tables Available Quarterly
CBER News Service

First Quarter Outlook Has Alabama Economy Improving Moderately in 2012

Growing nonfarm employment, a declining unemployment rate, and ongoing development projects across the state have economists at The University of Alabama's Center for Business and Economic Research (CBER) feeling more optimistic about the state's economy in 2012. Their outlook is presented in the First Quarter 2012 issue of Alabama Business. GDP growth is expected to accelerate from an estimated 2.2 percent in 2011 to about 2.5 percent this year. Forecasted employment gains of 1.1 percent compare to last year's 0.8 percent increase. Around 20,000 nonfarm jobs could be added during 2012.

Alabama nonfarm employment rose by 700 during the last quarter of 2011 and in December was 6,900 above its year-ago level. In particular, the state's durable goods manufacturers have rebounded, with a net gain of 4,300 jobs during the 12-month period. Manufacturers of primary and fabricated metals and transportation equipment are expected to contribute to job growth this year. Service providing businesses, in particular, administrative, support, and waste management services and retail trade, should see a strong showing on job creation during 2011 carry over into 2012. However, the state's unemployment rate, back below the U.S. rate at a seasonally-adjusted 8.1 percent in December, will decline only slowly as improvement in the employment picture encourages more Alabamians to enter or reenter the labor force.

The contribution of exports to the Alabama economy continues to grow; at $15.5 billion in 2010 exports accounted for 10.2 percent of the state's GDP. A total of $13.2 billion in exports during the first nine months of 2011 was up 17.9 percent from the same period during 2010. Shipments of transportation equipment, chemicals, minerals and ores, and primary metals all showed strong growth.

State tax revenues ended FY2011 much improved; tax collections totaled around $8.6 billion, up 5.0 percent from a year earlier. However, gains in tax receipts slowed to 2.5 percent in the first quarter of FY2012 compared to first quarter FY2011. Stronger growth in consumer spending in the state is needed to boost revenues; an increase of 1.8 percent in sales tax collections during the most recent quarter compares to an average of 3.6 percent in FY 2011. CBER expects growth in total tax receipts to slow to around 3.5 percent during FY2012.

Large manufacturing and services employers will be the major economic drivers in 2012. These include firms in automotive manufacturing, shipbuilding, steel, utilities, tourism, healthcare, biotechnology, and the state's major universities. However, uncertainties about federal budgets and deficit reduction will continue to challenge Alabama's many private contractors and government facilities engaged in aerospace and defense-related projects.

Business sentiment among executives statewide rebounded into positive territory on the Center's Alabama Business Confidence Index™ (ABCI) survey for the first quarter of 2012, rising 5.3 points to 50.8. About 76 percent of panelists expect the Alabama economy to hold its own or improve this quarter.

Alabama 2012 Economic Forecast Released at Annual Conference

Alabama’s economy should continue to slowly recover in 2012 according to the forecast from the Center for Business and Economic Research (CBER) presented at the 24th annual Economic Outlook Conference held January 12 in Montgomery. Ahmad Ijaz, the Center’s Director of Economic Forecasting, expects job growth of around 1.1 percent, with about 20,600 jobs added by Alabama businesses during 2012. That’s much better than the 0.2 percent job gain between November 2010 and November 2012, although the state needs to see a net increase of almost 135,000 jobs to bring employment back to prerecession levels.

The rebound in Alabama GDP should proceed at a stronger pace, with a 2.4 percent rise in output forecasted. That’s above the 2.2 percent increase in U.S. GDP expected by Dr. David Altig, Senior Vice President and Director of Research at the Federal Reserve Bank of Atlanta. Exports will be a positive for growth in both the state and national economies, while weakness in government spending and housing markets will continue to constrain the recoveries. Alabama’s total tax receipts, which rose 5.0 percent in FY 2011, could see almost as strong a gain during FY 2012.

Businesses overall are slightly optimistic in first quarter 2012, registering 50.8 on the Center’s Alabama Business Confidence Index™ (ABCI). Continued diversification and, in particular, growing tourism, exports, and manufacturing are among strengths that will propel the Alabama economy during 2012.

Employment in all of the state’s metro areas remained below prerecession annual peaks through 2011, with Huntsville, Florence-Muscle Shoals, and Auburn-Opelika having the smallest percentage deficits. Still, employment stabilized and unemployment fell in every metro area during the past year. Carolyn Trent, Socioeconomic Analyst at CBER, expects the groundwork laid in 2011 to lead to at least modest growth in every metro during 2012 as areas build on economic strengths and development initiatives to create jobs, recover from the 2011 tornadoes, and improve the quality of life for their residents.

Dr. Samuel Addy, Associate Dean for Research and Outreach in UA’s Culverhouse College of Commerce, addressed the 160 conference attendees over lunch, speaking on Critical Issues for U.S. Economic Recovery and Growth from a broad economic perspective of planning and optimal response to the current challenges.

View Dr. David Altig’s The Economy: A View from the Fed presentation here.

View Ahmad Ijaz’s 2012 Economic Outlook: Alabama presentation here.

View Carolyn Trent’s 2012 Economic Outlook: Alabama Metro Areas presentation here.

See what the press reported from the conference at the links below:

The Montgomery Advertiser
The Gadsden Times
The Tuscaloosa News

Conference sponsors this year include the Alabama Council on Economic Education, Alabama Department of Economic and Community Affairs, Alabama-Mississippi Intermodal Complex, Alabama Power, Alabama SBDC Network, BBVA Compass, BlueCross BlueShield of Alabama, Boeing Company, Hyundai Motor Manufacturing Alabama, Kuykendall & Associates, Mercedes-Benz U.S. International, Riley & Jackson, ServisFirst Bank, Sterne Agee, and Vulcan Materials Company.

Executive Summary––First Quarter 2012 Alabama Business Confidence Index™

ABCI: Business sentiment measured by UA’s Alabama Business Confidence Index™ (ABCI) moved back into positive territory at 50.8 for the first quarter of 2012, up 5.3 points from last quarter’s 45.5. Panelists are generally feeling mildly optimistic about their prospects this quarter, with all four industry indicators at or above 50. While economic conditions in the state should be a positive, the broader national economy is still expected to have a negative impact. With optimism early in 2011 giving way to pessimism as the pace of recovery slowed, Alabama business executives are decidedly more cautious than a year ago when the ABCI registered 55.1.

FINDINGS: Detailed results looking ahead to Q1 2012 include:

National Economic Outlook: Alabama business executives are not ready to conclude that the U.S. economy is on solid ground. Sentiment moved up 8.7 points on the first quarter 2012 survey, but at 46.5 indicates continuing weakness. About 28 percent of panelists expect improvement, while 36.5 percent feel that economic conditions at the national level are likely to worsen this quarter.

Alabama Economic Outlook: The Alabama economy index rose 7.0 points to 52.0 this quarter. About a third of panelists expect a better performance in first quarter 2012 than in the fourth quarter, while 24.4 percent think it could be worse. Business executives continue to feel that the state’s economy will outperform the nation’s; the Alabama index has been above 50 for five of the last six quarters.

Industry Sales: Sales are expected to increase moderately in the first quarter of 2012. The component index has indicated growth since first quarter 2010 and at 55.6 sales is the highest of the four industry indicators. The index is up 5.0 points from the fourth quarter, with 45.8 percent of firms anticipating an increase in sales this quarter versus 22.1 percent a decrease.

Industry Profits: About 36 percent of executives think profits in their industry will increase during the first quarter, while 33.2 percent expect no change from the fourth quarter. The index of 50.2 indicates slight improvement overall. Still, profits have the largest potential downside, as 31 percent of firms forecast a decrease.

Industry Hiring: Job growth is not expected to pick up this quarter, with an index of 50 indicating no change from fourth quarter 2011 trends. While there is a positive difference of 3.0 points between firms expecting to increase versus decrease hiring, the 3.7 percent forecasting a strong decrease cancels this out. Most businesses (55.7 percent) expect to maintain current staffing levels in first quarter 2012, lending stability to the employment picture.

Industry Capital Expenditures: Alabama is likely to see a very modest rise in capital spending overall this quarter; the component index of 50.6 is up 4.2 points from the fourth quarter. Most firms (53.9 percent) expect expenditures to be unchanged, while 25.8 percent forecast an increase.

ABCI by Industry: Alabama panelists in manufacturing and in the finance, insurance, and real estate and transportation, information, and utilities sectors are the most optimistic about the outlook for their industries in first quarter 2012 with ABCI readings in the 53 to 55 range. Healthcare businesses are the most pessimistic at 42.5.

Metropolitan Areas: Confidence in the Birmingham-Hoover metro rose 7.6 points to 52.7, while the Montgomery ABCI climbed 7.1 points to 54.3. Panelists in both areas forecast at least modest improvement in sales, profits, hiring, and capital spending in the first quarter. Business executives in Mobile expect the local economy to be relatively flat this quarter, with a reading of 49.6. Sentiment is weakest in the Huntsville metro area, where a more negative outlook for the U.S. economy and expected declines in profits, hiring, and capital spending contributed to an index of 47.0.

Alabama Forecast Tables Available Quarterly

The Center for Business and Economic Research is now making its detailed forecast tables of Alabama output and employment by sector available quarterly. Table releases in January, April, July, and October are generated by the Center’s Alabama Econometric Model based on current economic conditions and expectations.

To order the current quarter's forecast tables and pay by credit card, please go to the CBER Store, or send a check for $30 payable to The University of Alabama to: Center for Business and Economic Research, Box 870221, Tuscaloosa, AL 35487-0221.

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Center for Business and Economic Research, Box 870221, Tuscaloosa, AL 35487-0221
Phone: 205.348.6191, Fax: 205.348.2951, Email: uacber@cba.ua.edu