The regional economy is positive and area development is
strong – but there are concerns over potentially rising interest rates.
That was the message from Keith Aleardi of Fulton
Financial Advisors this morning at Lehigh Valley Business’ Real Estate &
Development Symposium at DeSales University in Upper Saucon Township. More than
500 professionals attended to hear multiple sessions on developments and
economic trends from a local, regional and global perspective.
Click here for a photo gallery of the event.
While economic growth has been below normal since the end
of the Great Recession, interest rates have been the primary tool to control
the economy, said Aleardi, senior vice president and chief investment officer
for Fulton Financial Advisors. His economic forecast provided a fairly positive
picture of where the economy is headed, tempered by the uncertainty surrounding
interest rates.
Interest rates tend to be a key factor in determining
whether the economy will improve, he added. In December, the Federal Reserve
raised interest rates for the first time in about 10 years and would like to be
on a tightening schedule where rates increase several times a year.
Aleardi said there are risks with raising rates too
slowly, since this can cause inflation to heat up. Risks also are inherent with
raising rates too quickly, since this can create weakness in China and other
emerging markets and pull the U.S. into a recession. Other central banks are
still in their easing cycles and have negative rates, he added.
The U.S. also is in a manufacturing slump, and the
industry has been contracting since 2015 because of lower production but also
the rising strength of the U.S. dollar.
“We are in a fragile environment, and raising rates could
put us in a contracting environment,” Aleardi said.
However, he said he believes the Federal Reserve will not
raise interest rates this month and look to June as more data become available.
Aleardi said his view of the construction industry is
positive as a whole. Highlights include a growth rate of 12 percent in
nonresidential construction. Retail and office vacancy has been on the rise,
though the retail market is still strong.
Asking prices and rents for retail and office properties
have been increasing as well, while the housing market is heating up, and
credit availability is starting to loosen.
On the regional and local level, the unemployment rate
has dropped, though wages haven’t really kept pace.
On the plus side, growth in the distribution, health care
and hospitality industries is expected to continue to increase. Also, there’s
been an upward trajectory in consumer spending since 2011, which is a good
sign, he said.
Among the key business issues to focus on over the next
18 months is the strengthening of the U.S. dollar, which puts further pressure
on manufacturing. Also, there is the potential for the U.S. to slip into a
recession in late 2016 or early 2017. Another unknown is whether the Federal
Reserve will hike interest rates four times in a year or reverse course and
lower rates.
Also, there is the potential that projected growth in the
recovery of the single-family housing market does not materialize, he said.
FEDEX MEGA-HUB UPDATE
Also at the symposium, Charles Everett, executive
director of the Lehigh-Northampton Airport Authority, discussed the potential
growth at and around Lehigh Valley International Airport, including the pending
location for a $335 million FedEx Ground mega-hub. FedEx has said it would like
to build the massive distribution center in either Allen Township near the
airport or in Bethlehem off Route 412.
Everett said he hopes to close on the Allen Township deal
in the next 30 to 60 days.
“No matter what happens, this development will be coming
to the Lehigh Valley, which is a good thing,” Everett said.
Source: LVB
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