ATLANTA -- Despite widespread damage from floods this summer, Georgia's economy will remain strong at least through 1996, according to economic forecaster Donald Ratajczak.
Ratajczak, director of Georgia State University's Economic Forecasting Center, also predicted continued growth of the national economy over the next two years, with long-term interest rates rising moderately.
"The [state's] leading indicators turned sharply negative during the summer, but the floods could have impacted housing permits, the workweek, and initial claims," Ratajczak said at a conference in Atlanta last Thursday.
"Current economic conditions are now growing more strongly than the leading indicators."
Ratajczak said gross state product for 1994 will rise "more than 6%" this year, slowing slightly to "still robust gains of 4.5% and 4%" in 1995 and 1996. He expects state revenue to rise 8% this fiscal year before accelerating to 8.5% before the Olympics, to be held in Atlanta in July 1996.
The floods, which hit the central and southern portions of the state in July, caused over $500 million in damages.
In the first quarter of Georgia's 1995 fiscal year, which began July 1, state revenues were 8.4% above the previous year, with strong sales tax receipts accounting for the growth. Corporate tax collection also showed large gains.
Ratajczak's report cited a 7.9% increase in retail trade for the first eight months of 1994 over the previous year. Durable goods were also up a sharp 23.6%. Business services accounted for 30% of the job gains in the state.
However, the report cites possible overbuilding in single-family housing and slow textile and apparel activity. Ratajczak believes the weaknesses are offset by gains in machinery, electronics, printing, and business services.
Nationally, Ratajczak sees gains in overall economic growth, predicting the gross domestic product will be 3.3% in 1995 before slowing to 2.4% in 1996. GDP rose 3.9% in 1994.
He expects rates on 30-year U.S. Treasury bonds to reach 8.5% by 1985 and 8.7% in 1996.
"The economy's real problem at this time is not that interest rates are too high, but that the economy is flying too high," he said. "A continuation of this rapid growth will expose bottlenecks, leading to rising inflation."
"As inflation begins to be added to decision makers' calculations, speculative inventory holdings could develop," Ratajczak said. "Furthermore, the Federal Reserve would not tolerate additional inflation, especially if it begins to become embedded in wage costs."
