Economists expect a more ‘normal’ 2014

Feb. 07, 2014 @ 12:15 PM

Punxsutawney Phil saw his shadow Sunday, thus predicting six more weeks of winter. 

At the fourth annual Groundhog Day Summit on Wednesday, the forecast was similar. 

John Augustine, chief investment strategist with Fifth Third Bank, also predicted about six weeks of volatile markets before things calm down and the economy moves “toward a more normal world.”

Augustine said that because they are rebalancing after a successful year, preparing for new leadership and direction at the Federal Reserve, looking at emerging growth markets and currency concerns and dealing with the coldest winter in more than 20 years, the markets will remain unsteady in the first quarter before the strong year that he predicted. 

Augustine said the gross domestic product (GDP) is moving back to its long-term average and all four components of the nation’s economy (investments, exports, consumption and government) are increasing. 

In North Carolina, the real GDP is above the national trend. 

“On a relative basis, we’re doing very well in North Carolina,” Augustine said. 

Augustine said that consumer focus is trending in the correct direction, personal income is up and consumer confidence is up. Household net worth has increased and is stronger than before the “great recession.” He noted that the unemployment rate is down, but that figure is open to a lot of subjectivity. 

“Hopefully your household mirrors these numbers,” Augustine said. 

From a business standpoint, things are getting back to normal, he said. Business optimism and utilization of capacity are up. Valuations are returning back to normal, though some other trends are stalling. 

Augustine presented a checklist for businesses. He said they should check if their planning is up-to-date and how they can grow their asset base. Also, he said businesses should plan for growth and identify one area of expense control and one area of revenue growth. 

Danny Fontana, with Pilot Portfolio Management, has lived in North Carolina since the 1970s and spoke to the group about the state. He has worked in financial services for about 30 years. 

“When it comes to this stuff, nobody knows nothing,” Fontana said. He said they all make educated guesses, but most economists will give you different answers to the same question. 

However, he said there are reasons to be optimistic. 

“This year is a whole lot better than last year,” Fontana said. 

He cited Governor Pat McCrory, who said that agriculture would bring the state out of recession; Harry Davis with Appalachian State University who said unemployment will continue to fall; and Kelly King with BBT, who said there will be better loan growth. 

Fontana said, in his opinion, the biggest driver of the economy is “the wealth effect,” Where the more money a person earns and keeps, the better they feel, which can translate into spending, growth and jobs. 

In conclusion, Augustine said the most important thing for businesses this year will be to look at their balance sheets in order to grow assets and control or reduce liabilities. 

Fontana talked about managing your stock portfolio by making sure to diversify. 

“You have to be more nimble than you’ve been in the past,” Fontana said. 

The Groundhog Day Economic Summit is held by Monroe Union County Economic Development as a chance to reflect on last year and plan for the year to come.