Economic update discussed at Chamber luncheon

With a change in the presidency comes changes across the nation on all fronts, including the economy. During the Homewood chamber's monthly luncheon on March 21, Tracy Bell, with Iberia Bank, updated the local community on current standings and what the future may hold.

"I normally speak on ... where we've been, where we are and where we may be," she said, adding that no one is really sure what may happen in the future.

Bell said economic data "turned to the upside" in October of 2016, but spending is not any higher and consumers are remaining financially conservative. According to her graphs, since the start of the new year, personal consumption has dropped about 0.30 percent. Real income and spending are also down, but consumer savings have remained the same.

"This is something that we've seen happen since the Great Depression and 2008 as well, the great recession of 2008-2009," she said. "People really aren't spending more than they're making."

Bell continued, adding that although uncertainty for small businesses is high, so is confidence, and conditions for larger businesses are strong too.

"[This upward trend] this suggests that the upwards momentum that we see right now, the stability and growth that we see right now, is probably sustainable for the next couple of months," Bell said. Now, she added, markets, businesses and consumers can expect tax reform, deregulation and infrastructure while the job market remains tight and inflation is firming.

Bell said inflation is "trending higher," caused majorly by higher oil prices, and the Federal Reserve's target is 2 percent inflation.

"We can run hot on inflation, we know how to fix that," she said. "It's much more difficult to fix deflation."

With full employment, a target inflation and stable growth, Bell said the federal reserve will "probably stay pretty happy." But, within the next 10 years, Bell said deficits as a part of the GDP are expected to exceed their 50 year average, due in part to spending for social security and Medicare.

"A lot of this is from social security," she said. When the program was founded, Bell said there were 40 to 50 workers per retiree. Now, there is an average of four to five workers per retiree. Enrollment in the program is also rising and citizens are living longer. Of the $2.6 trillion budget increase projected for the next 10 years, Bell said 51 percent of it is from social security and Medicare, and while the budget is a large discussion currently in Washington D.C., she believes the discussion is "far from over."

Due to procedural reasons, adjustments or repeals to the Affordable Care Act must be completed before Congress can discuss tax plans and infrastructure.

"The ACA is a big deal," Bell said. "If you make that worse, that's a big chunk of the population you're effecting."

Bell also predicted a range in change in stocks from -17.4 to +10.1 percent and a stated a suggested 1 percent fall in price of bonds for the rest of the year.

She added that the economy may be pressured later this year by many factors, including higher oil and gasoline prices, higher long-term interest and mortgage rates and a stronger US dollar. 

"The bottom line, for us, is economic growth is pretty good coming in to 2017. It turned last year, and it's held up remarkably well," Bell said. "Looking out a little bit longer ... we've got some headwinds."

The Homewood Chamber of Commerce will hosting their next monthly luncheon on April 18 at The Club. During the luncheon, the chamber will be honoring their Excellence in Education awards. To register, visit homewoodchamber.org. 

Editor's note: This article was updated at 1:35 p.m. on March 23 to reflect corrections regarding personal consumption and the projected budget increase.