S.C. Statehouse Report
Sunday, Oct. 24, 2004
VIEW: http://www.statehousereport.com/columns/04.1024.economy.htm

COMMENTARY

State's economic picture is muted, at best
By Andy Brack
SC Statehouse Report

OCT. 24, 2004 -- South Carolina's economic picture for the next year appears to be mixed at best. Some see it as a glass that's half full. Others see the glass as half empty.

Consider the positives in recent news:

Overseas investment remains high. The state ranks second nationally in the percentage of workers employed by American subsidiaries of foreign firms. More than 123,000 people - - about 8.1 percent of private-sector workers - - are employed by large companies like BMW and Michelin and smaller ones across the state.

"South Carolina has aggressively marketed itself in the global market," said College of Charleston economist Frank Hefner. Had it not, the state's job picture would be bleaker.

The real estate market is strong, particularly on the coast. While new home construction is sagging some and the state has lost some construction jobs due to recent bad weather, the market overall is strong, notes Charleston Realtor John Settle III.

"The resale housing market is doing nothing but going up, up, up and up," he said. "It's just phenomenal."

Some corporate profits are up. In news this month, the South Financial Group, which owns Carolina First bank, announced quarterly profits of 30 percent. South Carolina Bank and Trust announced slightly higher profits. Arthur State Bank of Union said it would open offices in Columbia because of a better business environment.

And Sonoco, the Hartsville-based packaging giant, showed quarterly profits that nearly quadrupled due to higher sales and lower costs. Observers often say if basic product providers like Sonoco are doing well, the economy of the near future likely will do well. It makes sense - - if a company needs more packaging, it probably expects to produce more.

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Other news doesn't provide as much comfort:

Unemployment is up. South Carolina's unemployment rate rose to 6.9 percent in September. Tourism and construction jobs were down, but some seasonal jobs were up.

Not reflected in job loss figures for September were two just-announced plant closings. Delta Woodside in Piedmont said it would close a mill by Nov. 20, which would be put 361 people out of work. Nearby in Oconee County, Piedmont Home Textile Corp. said it would close, which would leave 122 without work by the end of the year. Both closures reportedly are due to foreign imports, a new wave of which is expected to flood the market in January when quotas are lifted.

Fuel prices are up. Anybody knows gasoline is now above $2 per gallon in many places. But energy experts predict home heating costs to rise this winter because natural gas futures are up more than 300 percent and coal prices are expected to rise stiffly too.

As one top-level energy executive recently noted, higher energy prices might dampen growth from higher sales and a slightly rebounding economy. Ryan's Restaurant CEO Charles Way told reporters recently he anticipated a difficult business environment to continue because higher oil prices would sap consumer confidence.

Hefner agreed that consumer confidence might go down if gas prices hit $3 per gallon, but that wasn't likely. If prices went, say, to $2.10 or $2.20, people would continue to spend because Americans see travel as a necessity. He predicted consumers likely would continue to spend - - even if they had to go deeper in debt - - unless things got real bad.

The unpredictability of the economy presents a challenge Wednesday to the state Board of Economic Advisors, which is expected to present an economic forecast that is the first step in next year's state budget-making process.

If the BEA is too conservative, lawmakers will face another lean budget year and potentially cut more services, which many already believe are on life-support. If forecasters paint too rosy of a picture, lawmakers may face an easier time in 2005, but have shortfalls to deal with down the road.


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The latest from cartoonist Bill McLemore:


LEARN MORE DAILY

The best way to get South Carolina news is to augment your morning paper and TV show with SC Clips, a daily executive news summary compiled from more than 30 state newspaper and TV sources. It's delivered every business day and is packed with news of statewide impact, politics, business and more. Subscriptions are affordable at $30 per month -- and less for business subscribers. More: SC Clips.


SOUTH CAROLINA SCORECARD

Here's a "thumbs up" and "thumbs down" related to various political events from the past week:

Thumbs up

Tenenbaum. The Democratic State Superintendent is holding her own in what appears to be a race coming down to the wire. GOP nominee Jim DeMint, however, still seems to be ahead.

McMaster. Hats off to Attorney General Henry McMaster for a crackdown on dogfighting. Now if he could get out of the people-fighting in the Carolina Investors case ...

Thumbs down

Joblessness. The state's unemployment rate hit 6.9 percent - - not too good of a record for those in power.

Carolina Medical Review. The nonprofit shouldn't have tried to link vaccinations with voting.


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