Southeastern forecast: return to growth in New Year: the Southeastern economy suffered the effects of competition, declining demand for manufactured goods, shrinking business investment and a sharp reduction in travel-related activities during 2001. For 2002, a gradual recovery is on tap for the region, but growth is likely to be slower than what was the norm for the latter part of the 1990s - Regional Focus

EconSouth, Winter, 2001 by John Robertson, David Avery, Whitney Mancuso, Navnita Sarma, Gustavo Uceda

The outlook for 2002 is for a reasonably quick improvement in Florida's service industry. The key will be the speed with which leisure travelers regain confidence in the safety of air travel. This recovery will be especially important for south Florida, where over 90 percent of visitors arrive by air. During 2001 the state's Department of Travel and Tourism launched a new advertising campaign designed to play up driving to Florida destinations. The car rental and cruise industries may experience further consolidation as travel companies search for greater efficiency and profitability. In the short term, cruise lines, resorts, hotel/motels and theme parks are likely to continue to offer special prices and package deals to attract business, at least until bookings return to more normal levels.

Manufacturing will gradually recover

For the preceding 12 months through the third quarter of 2001, factory employment in Florida declined approximately 1.3 percent, the smallest percentage decline of any Southeastern state, following a small gain in 2000. This relatively good performance is mainly the result of the diversity of Florida's factory sector, with its relatively low concentration in apparel and textile manufacturing. But Florida's manufacturers were not immune to a generally slower economy in 2001.

In the last quarter of 2001, producers of security equipment saw a strong increase in demand as businesses and government agencies took steps to improve security infrastructure. But signs of overall weakness appeared in the electronic equipment and industrial machinery sectors as consumer spending waned and companies cut back on capital equipment purchases. Industrial machinery employment fell by 1.5 percent over the year. The high-tech and aerospace sectors were especially hard-hit as companies laid off employees. For example, some of Palm Beach's largest employers -- Motorola, Pratt & Whitney, and Daleen Technologies -- reported large layoffs. In Tampa, SBC Telecommunications shut down operations and eliminated 400 jobs.

The lumber and wood and paper industries also trimmed employment rolls. The state's very large printing and publishing component posted job losses in 2001 as advertising revenues declined and competition from nonprint media sources increased.

Activity in Florida's factory sector is likely to remain slow in 2002, but its diversity will help minimize any further retrenchment. A turnaround for the state's high-tech and capital equipment producers will depend on a pickup in business investment, which is not likely to occur until businesses' balance sheets improve.

Residential markets solid, but commercial construction will slow

The Florida housing market experienced another strong year in 2001. When comparing the third quarter of 2000 to the third quarter of 2001, permit issuance increased by over 11 percent compared with a 7 percent pace for the Southeast. Existing home sales were flat for the state as a whole, but inventories in south Florida were particularly low in the face of very strong demand. In some cases, low inventories there were restraining sales growth. During the coming year, Florida's housing market is set to experience continued growth because the state remains a desirable destination for individuals from Northern states and Latin American countries.