By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published March 27, 2009

Economic activity in the Charleston region will remain flat for most of 2009, with recovery beginning late in the year and continuing in 2010, according to an annual forecast presented Thursday.

“The outlook is for a gradual increase, not the rapid increase experienced in the recovery cycles of past recessions,” said the report from the Charleston Metro Chamber of Commerce’s Center for Business Research.

Declining activity at the Port of Charleston is likely to cloud the region’s and state’s economy in the coming year, the forecast said.

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Research shows port volume has a direct relationship with job growth in the region, said College of Charleston economist Frank Hefner, who presented the 2009 Economic Forecast to a packed crowd at Charleston Place.

“In other words, the port is the driver of the region’s economy,” the report said. “Any drop or increase in port activity will be felt throughout the region’s economy.”

The report labeled Danish shipping line Maerks’s announcement that it would pull out from the port this year as the “hardest blow” to the local economy in 2008. The line represents about 20% of the port’s container business.

“(Maersk’s) decision to leave is likely to have a profound impact on the local maritime industry and related businesses across the state, including trucking companies and commercial developers,” the report said.

This year port activity is expected to drop by 7.5%, the forecast shows. That follows annual declines of nearly 11% in 2007 and 7% in 2008.

The forecast shows port activity picking up by 3% in 2010, but Hefner noted that the baseline for growth would be well below port volume seen in recent years.

The annual economic forecast, prepared by the chamber and the College of Charleston, is based on statistical modeling that uses recent data to predict future trends. Hefner said this year’s forecast was more difficult to construct than any in recent history because of unprecedented economic volatility, and he warned that the projections are subject to a degree of uncertainty.

Jobs

According to the forecast, the unemployment rate is expected to rise in the near future. The region’s  unemployment rate, which preliminary data show averaged 4.6% for the 2008 year, will likely rise to 6.5% for 2009 and again to 6.9% in 2010.

Recent data from the U.S. Department of Labor show the metro area’s unemployment rate for January was 8.6%. Hefner said the current unemployment rate is the highest since 1990.

Real estate
After years of major gains, residential real estate values in the metro area dipped slightly in 2008. The average sales price last year fell 0.2% to $299,721 from the 2007 average of $300,446.

Forecasters expect a larger decline this year to $293,726, followed by an average sales price in 2010 that rises back to 2008 levels.

Total sales for 2009 are expected to fall by about 30%, compared to 2008 sales. For 2010, total sales are expected to remain at the  same level as 2009.

Hefner said the Charleston region could experience a housing shortage in three to four years, as demographic changes kick in.

Retail sales
The region’s retail sales totals have not changed much since 2006, which Hefner said is related to declining home equity, which had provided residents with cash. But total retail sales stayed positive in 2007 and 2008 instead of slipping with the rest of the economy, thanks largely to the area’s hospitality and tourism industry, Hefner said.

This year forecasters expect retail sales to grow 3.6%, followed by 3.3% growth in 2010. But Hefner said that growth probably will not outpace inflation.

Tourism
The local tourism industry has suffered, in part, from businesses slashing travel budgets, Hefner said. The average hotel occupancy rate in Charleston County fell 1.5% in 2008, the report said.

Occupancy is expected to recover in 2009 by about the same percentage and hold steady in 2010. Flat projections for average occupancy rates are based primarily on new hotel rooms coming  online, the report said.

Stimulus
How the federal government’s recent stimulus plan will affect economic recovery remains unclear, Hefner said. Many economists expect stimulus money to start flowing by the summer, he said, and that could be too late to make a major difference.