Economic Forecast Predicts Downward Trend
Posted August 19, 1999FOR IMMEDIATE RELEASE
(YORK, PA)--Based on recent national and local economic activity, the York College-York Federal Institute for Regional Affairs is revising it's growth forecast for York County downward. Three factors contribute to this downward revision: the national economic slowdown during the second quarter, the Federal Reserve's move to raise interest rates and the local layoffs at AMP combined with the closing of Preston Trucking.
Nationally, the growth rate fell from 4.8% in the first quarter to 2.7% in the second. The national economy exerts a large influence on the York County economy. Many of the manufactured products produced in York are exported to other areas of the country. As economic activity slows elsewhere, York manufacturers will feel the slowdown.
In June, the Federal Reserve, in a move to stave off inflationary pressures moved to raise the Federal Funds rate. This move announced the Fed's concern over escalating wages in tight labor markets translating into higher prices. The Fed's move will tend to slow national economic activity still further.
Finally, while local investment in durable equipment by producers is expected to show robust growth this year (9.9%), while both residential and non-residential investment are expected to be stagnant. The Institute anticipates non-residential investment to grow by on 0.6% this year while residential investment is expected to fall by 1.5%.
Our forecast is now calling for economic growth of 3.7% this year instead of the 4.1% previously forecast in May. Employment growth is also downgraded to 2%.
The labor market remains tight and we expect wages to increase by 4.6% this year. The largest wage increase will be in the service sector (6.0%) followed closely by the construction sector (5.0%). Wage increases in manufacturing are forecast at 4.77% in durable goods manufacturing and 4.6% in non-durable goods manufacturing.
While wages are rising fastest in the services and construction sectors, these sectors are actually forecast to experience declines in productivity. In durable goods manufacturing, productivity is forecast to increase faster (4.8%) than wages but in the non-durable goods sector productivity will grow much more slowly (2.3%).
Finally, the Institute is forecasting real income per person to grow by a modest 2.6% this year.
The Institute for Regional Affairs is dedicated to evaluating the issues that shape the economic, political, and social health of the region. The Institute conducts research as well as organizes and reports on information and events that impact the quality of life here in Central Pennsylvania.
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