UNC Charlotte professor John Connaughton says the North Carolina economy continues to grow, and state legislators will soon consider whether infrastructure spending is around the corner.
During the Barings/UNC Charlotte Economic Forecast at UNC Charlotte Center City, the economist said an infrastructure bill could extend the economic expansion for several more years, but possibly at the expense of increasing the deficit.
Connaughton shared key infrastructure updates during the Forecast. During the 1950s and 1960s, infrastructure spending in the United States averaged between 2.5 and 3 percent of U.S. GDP. Since then, U.S. infrastructure spending has dropped to between 2 and 2.5 percent of GDP. As a result, U.S. infrastructure has become older and less reliable. Federal, state and local inflation-adjusted spending on infrastructure peaked in 2003.
During the past 15 years, state and local infrastructure spending has declined by 5 percent and federal spending has declined by 19 percent. Over the next decade, the American Society of Civil Engineers estimates that the U.S. faces an over $2 trillion infrastructure gap.
Projections for 2018 are up for the state over the last quarter, Connaughton said. In 2018, Gross State Product (GSP) is expected to reach a level of $570,389.5 million. Real (inflation-adjusted) GSP is expected to increase by 2.9 percent over the 2017 level.
“The growth expected in 2018 appears to be stronger than the first eight years of this economic expansion. The deregulation of the current administration seems to have pumped some life into the economy during the second half of 2017,” Connaughton said. “During the end of 2017, both the North Carolina and U.S. economies gained considerable strength and have begun to expand closer to a 3 percent rate. The question going forward is: Will this stronger growth rate continue into 2018?”
He added that in 2018, the biggest economic driver will be the corporate and individual tax cut legislation passed in December 2017. “The corporate tax reduction will have the most impact on the economy in 2018 as the U.S. tax burden on domestic corporations is now in line with that of our major trading partners,” Connaughton said.
Gross State Product (GSP) is expected to reach a level of $570,389.5 million in 2018. Real (inflation-adjusted) GSP is expected to increase by 2.9 percent over the 2017 level. Most of the state’s economic sectors - 14 out of 15 - are forecast to experience output increases in 2018, with mining expected to have the largest increase of 30.7 percent. The only exception is agriculture, which is expected to slightly decline by 0.04 percent.
Connaughton presented his quarterly forecast as part of the Barings/UNC Charlotte Economic Forecast organized by Barings and the UNC Charlotte Belk College of Business.