EDITOR'S
PERSPECTIVE - January 2002
by Claude Hammond
Lane Looks Forward
Leading Kentucky business publisher allows rare interview
Remember some of
the great predictions you read in some of this state’s newspapers
and magazines last January? There were great visions, such as an Al
Gore presidency following a Florida recount; a rocketing high-tech economy
with dot-coms taking the Dow above 12,000; and of Rick Pitino turning
around the Boston Celtics.
We all know what
happened in each scenario.
So I questioned
my publisher, Ed Lane, and got his personal predictions for the U.S.
and Kentucky economies in 2002. So, here are some economic predictions
from Ed Lane, Kentucky’s best-known business publisher, made Roman
emperor-style. Thumbs up means good news for that particular sector,
thumbs down means bad news.
Tax
Cuts: Thumbs up
“When
the Senate decides to help the people instead of their special interests,
their economic stimulus package is likely to include some significant
tax reductions.”
Government
Spending: Thumbs up
“It’s
going to increase, possibly to deficit levels, because we’re going
to need to eradicate a few more terrorists. But that’s a good thing.
It’ll result in a safer world in which to do business.”
Cutting
the Prime Rate: Thumbs up
“The
Fed cut a quarter point in mid-December. They’ll cut it again soon.
This will result in even lower mortgage rates. Housing starts in November
jumped 8.2 percent, which was the fastest pace since the summer.”
Stability
of Energy Prices: Thumbs up
“Each
penny reduction in gasoline prices adds about $1 billion annually to
consumer discretionary spending. Natural gas and heating oil prices
are lower, too. But there’s a downside to this too. The market
prices for Kentucky-produced oil, natural gas and coal has declined.”
Unemployment:
Thumbs down
“The
November rate was 5.7 percent, up from 4.4 percent in January, 2000.
We see layoffs coming from businesses that are losing money as well
as those cutting expenses to avoid being unprofitable. When the economy
picks up, productivity will increase first, with existing employees.
After that, employment will increase. It may take awhile for the employment
numbers to improve. If you talk about productivity alone, I would give
a thumbs up. We’ll see dramatic improvement in productivity numbers.”
A
Wall Street Recovery: Thumbs up
“Things are still volatile. But the market is smarter than ever
before. That’s a result of the record number of Americans who have
invested there. But, average household net worth has declined because
of stock portfolios.”
Bank
Reserves: Thumbs down
“Banks are accruing for potential bad loans. They’re still
paying for the dot-bombs and the business downturn resulting from the
Clinton Recession and Sept. 11th attacks.”
Inflation:
Thumbs up
“It shouldn’t be a big problem. Inflation has been well controlled
since the Reagan days. The core rate for 2002 is projected at less than
two percent.”
Venture
Capital: Thumbs down
“Venture capitalists are going to play it safe for awhile. Venture
capital investment was down 72 percent in 2001’s third quarter
from what it was in 2000.”
Inventories:
Thumbs up
“They’re low, but that means they will deplete sooner, so
manufacturing activity will eventually need to increase.”
Manufacturing:
Thumbs down
“For now, businesses are mostly holding off on capital investments.
This is in the non-defense sector, however. The defense contractors,
even the little ones, should do well.”
Tobacco:
Thumbs down
“The market for burley is declining, but Kentucky farmers are smart.
We’re starting to see a greater diversity in this state’s
agriculture.”
Kentucky’s
auto makers: Thumbs up
“Auto sales are holding and Toyota is outsourcing more components
in the U.S. and Kentucky. Hardin County is a potential site for a new
auto plant and the Kentucky-made Chevy Corvette is one sweet sports
car.”
Education:
Thumbs up
“Enrollment in postsecondary education is at record levels. Applications
for the fall 2002 semester are strong. But educating young people and
keeping them in the Commonwealth are two different things.”
Government revenue:
Thumbs up
“State revenues were up 4.5 percent in November, but only two percent,
year to date. A one percent increase is anticipated versus nine-tenths
of a percent budgeted for.”
Thoroughbred
industry: Thumbs down
“Great management in this industry. Overall, great investors, but
they’re still paying the price of Mare Reproductive Loss Syndrome.
I hope I’m wrong, but it might indicate a decline in yearling sales.”
Kentucky
exports: Thumbs up
“The U.S. Department of Commerce’s Export Assistance Centers
in Louisville, Lexington and Somerset are doing their jobs right. From
the Lexington MSA alone, we see a projection of $1.88 billion in exported
services and goods.”
Tourism
industry: Thumbs down
“We’ll see some declines due to reduced air travel. But Kentucky’s
central location is working in our favor. Millions of visitors pass
through our state annually on Interstates 65 and 75 alone.”
Commercial
construction: Thumbs down
Residential construction: Thumbs up
“Construction is a mixed bag. The most recent figures indicate
increased residential building activity. Commercial construction gets
a thumbs down, because corporations are delaying major expenditures.”
So there you have
a view of Kentucky’s 2002 economic future, in Ed Lane’s own
words.
I just hope we didn’t
take this Roman Emperor, thumbs-up thing too far. It’s going to
take some doing to convince Ed to stop wearing a toga to work.
Claude Hammond
is editorial director of The Lane Report.
editorial@lanereport.com
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