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By Lisa Loy
On the national level, the variables at play with our future economy include energy, inflation interest rates, and housing. Jim Kleckley, the Director of East Carolina University’s Bureau of business Research spoke gave his annual economic forecast at a Chamber of Commerce hosted breakfast at the Hilton Garden Inn in Kitty Hawk in March.
“In my mind, it starts with energy. The CP index for energy parallels oil prices.” Kleckley said. “The inflation index marches with energy. When you get big changes, that’s when the economy responds. It’s not what you pay at the pump but how that filters through the system.”
If energy pushes inflation, and inflation results in lower interest rates, then growth will be the result.
Interest rates were going up over the last period, and housing, on a national level went down. With so many jobs tied to construction, the ripple effect is obvious, right down to discretionary spending, from dining out to the number of visits a person can afford to make to the dentist’s office.
Spending was also affected by the glut of sub-prime lending. Homebuyers stretched to the limit to qualify for a mortgage on high priced housing succumbed to the teaser rates offered on adjustable rate mortgages which adjust annually with whatever the prime interest rate happens to be (take the federal funds rate, currently at 5.25, add 3-percent, and that’s prime). It’s not hard to see the financial discomfort a family might experience when their mortgage interest adjusts within a year or two and their payment almost doubles.
Oil peaked in July of last year at $80 a barrel. “Now we have an opportunity for the Federal Reserve to lower interest rates.” Kleckley said. “My experience is that the Federal Reserve will probably lower rates sooner rather than later.”
Retail sales are on the rise in Currituck and Dare counties according to North Carolina Department of Revenue statistics. From June of 2000 to June of 2006, gross sales climbed by 8.7 percent, the lowest being in Dare last year with a modest increase of only 3 percent while Currituck jumped by 11 percent.
According to Kleckley, construction starts were down significantly in 2006, but we may have already bottom.
Figures released in late March show an increase in year-to-date starts over 2006 he said. Kleckley is “cautiously optimistic.”
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