Economic growth in North Carolina is expected to grow at a sluggish pace in 2015 with no significant growth expected for the remainder of 2014, UNC Charlotte economist John Connaughton recently reported in his quarterly forecast for the state.
According to Connaughton, N.C. Gross State Product (GSP) is expected to reach a level of $482,911.70 million in 2014, a real (inflation-adjusted) increase of 1.5 percent over the 2013 level. This growth forecast in 2014 would follow two years of modest GSP increase in North Carolina.
For 2015, Connaughton expects the state economy to increase by an inflation-adjusted rate of 2.1 percent.
Connaughton, the Babson Capital Professor of Financial Economics in the Belk College of Business, attributed the slowing economic pace to several factors.
“First, the Federal Reserve is continuing to taper its quantitative easing program. Since September of 2012, the Federal Reserve has been purchasing $85 billion in mortgage-backed securities and U.S. Treasury bonds per month. Beginning in January of this year, the Federal Reserve began to taper its purchases and is now buying only $25 billion a month,” said Connaughton. “The second contributing factor is the aging of the labor force. Baby boomers are reaching retirement age and their retirement effectively reduces the overall size of the labor force. Upon retirement, baby boomers also decrease their level of spending, thus reducing potential GDP and lowering economic growth.
“Finally, the Eurozone economy is again slowing. Overall, Eurozone GDP was flat in the second quarter and the forecast for the remainder of 2014 does not indicate any significant growth,” he concluded.
Connaughton presented his quarterly forecast to members of the Charlotte business community and the media at a luncheon held at UNC Charlotte Center City. The forecast is funded by Babson Capital Management LLC.