By ERIN McDONOUGH, MOGA PRESIDENT & CEO
This week's annual state Consensus Revenue Estimating Conference outlined the projections that went into to laying out the budget numbers state legislators will work with moving forward. While overall projections were cautiously optimistic, the message was to expect growth to be slow.
Optimism runs high with consumers and small business operators, aligning with the presidential election. High interest rates and high value of dollar may curb GDP growth. Analysts also predict that oil-related investment will be growing, which will improve the GDP growth rate, but at a 2 percent growth rate.
In terms of infrastructure spending, no one was sure what it will look like, but it was stated that this has the potential to build more spending (growth).
The price of oil was considered to be less of a story moving forward according to analysts. Since falling in late 2014 and staying low in 2015, prices rose in last quarter because OPEC agreed to cut output. State analysts believe that the price will remain around $50 for WTI for the foreseeable future, stating that there are a lot of domestic shale producers who will come on board should prices rise. This would mean that prices could rise in the short term, but once domestic producers react to the positive pricing by producing more oil, the price will come back down and stay around $50 per barrel in 2017.
IHS Markit analysts who further discussed projections showed that mining and logging jobs both took a beating recently, but that rig counts are growing, showing a potential uptick in jobs.
Low gas prices contributed to an increase in disposable income, but projections showed people were saving more and switching more of that disposable income to service instead of spending on goods, impacting sales tax numbers.
The largest services categories include health care premiums, education and housing. State Treasurer, Nick Khouri, touched on this, stating that this trend will continue as we move into a more virtual economy and conversations should include looking at how the state may want to react to this long-term and persistent change.