Uneven growth expected for Northwest Florida economy


  • March 6, 2015
  • /   jeffrey cassady
  • /   economy
Northwest Florida is poised for growth over the next three months, but progress will be uneven, with economic activity in one metro area projected to decrease in that time. Those are the findings of the University of West Florida Haas Center’s new quarterly Indexes of Coincident and Leading Economic Indicators. The indexes measure the current health of Northwest Florida economies and predict whether they will be better or worse off months down the road. The indexes show that the Pensacola and Fort Walton Beach economies are growing and will continue to grow through at least May. However, economic activity in the Panama City area has slowed over the past few months, and the slowdown is expected to get more severe over the next three months, according to the indexes. “Many of the economic outcomes we will observe months from now can be predicted from a careful look at changes that are occurring today,” said UWF economist Rick Harper, who directs the Studer Community Institute in Pensacola and oversees the University’s Office of Economic Development and Engagement. “Better information will help families and policymakers as they make important decisions.” The coincident and leading indexes use the monthly unemployment rate, nonfarm payroll information and retail sales data for the Pensacola, Fort Walton Beach and Panama City areas from 1990 through November 2014 to assign index scores to each of the metro areas. November 2014 is the most recent month for which the Haas Center has reliable information. Month-to-month variations in an area’s index score reflect changes in the level of economic activity. All regions began with a score of 100 in 1990, meaning that index scores higher than 100 indicate economic activity that is greater than 1990 levels, while lower scores reflect less activity. The coincident indexrelies on indicators that show how the economy performed in the month measured, while the leading index utilizes forward-looking indicators to project where the economy will be six months from the month measured. “Coincident and leading indexes are very useful economic tools to better understand the current and future states of the economy,” said Soheil Nadimi, the Haas Center economist who created the index. “For a given region, a reliable coincident index should utilize local indicators that appropriately track local business cycles. However, to have a reliable leading index for a region, both key local and national indicators should be employed so as to capture the impact of both local and national shocks on future behavior of the economy. “However, a big, unexpected shock to the local economy in the next six months can change our estimates,” Nadimi continued. “Hence, any forecasts of economic growth are routinely qualified with that caveat.” The Pensacola area, which includes Santa Rosa County and is defined as Pensacola-Ferry Pass-Brent, had a coincident score of 126.4 as of November 2014. The area’s score improved consistently throughout the year, indicating economic growth over that period. Pensacola had a leading index score of 127.2 in November, suggesting that growth will not only continue, but also accelerate, over through May, Harper said. coincident-index-pensacola “Pensacola’s coincident index has increased at an average rate of 2.6 percent over the last year,” Harper said, adding that the most recent leading index data suggests that the indicators will improve by an average of about 3.3 percent over the next three months. The coincident index shows that economic activity in Pensacola peaked in December 2006, when the area notched a score of 137.9. The area’s index score fell sharply after that with the onset of the Great Recession of 2007-09. Economic activity in the Pensacola area hit a post-recession low in December 2009, when the area’s index score bottomed out at 112.2. The Fort Walton Beach area, identified as the Crestview-Fort Walton Beach-Destin metropolitan statistical area, had a coincident index score of 156.1 in November, a 2.8 percent improvement from the same month the previous year and an indication that the economy grew over that period. The area had a leading indicator index score of 157.4 in November, an improvement from 154.4 the same month in 2013. coincident-index-fwb The Fort Walton Beach area’s coincident index score increased an average 3.3 percent over the last year, Harper said. “However, the most recent value of the leading index points toward growth in (March, April and May 2015) at a slightly slower rate of 2.6 percent,” Harper said. The Fort Walton Beach-area economy peaked in January 2006 with a coincident index score of 176.1. It slid through the recession, hitting a post-recession trough in March 2010 with a score of 138.9. The Panama City-Lynn Haven-Panama City Beach metro area had a coincident index score of 140.7 in November 2014, down from 141.6 a year earlier but better than the area’s post-recession low of 135.8, which came in March 2010. The area’s leading indicator index score for November 2014 was 140.7, compared to 142.6 in November 2013. coincident-index-panama-city Harper said the data show that economic activity was basically flat in the Panama City area over the past year, with data from the second half of the year suggesting that growth slowed and actually turned negative during that time. “The most recent value of the leading index points toward a continued decrease in activity (over the next three months) at a rate of -1.3 percent,” he said. Panama City’s coincident index score hit a high of 149.3 in May 2007, shortly before the housing collapse that led to the Great Recession. Jeffrey Cassady is a writer for the Haas Center. He covers Northwest Florida business and economic issues.
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