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SC's tepid growth in '18 has economists scratching their heads

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Hurricane Florence dealt a blow to the South Carolina economy as the storm shut down a large portion of the state for at least a few days in September. File/Lauren Petracca/ Staff

Growing but slowing.

That about sums up the state of the South Carolina economy in 2018 based on the U.S. Commerce Department's math.

The agency's Bureau of Economic Analysis last week released its annual state-by-state scorecard tallying the value of goods and services produced across the country in 2018.

South Carolina didn’t exactly shine in the report. It ended 2018 on a whimper, with an underwhelming 1.6% gain in the gross domestic product department, down from 2.6% in 2017 and behind neighboring North Carolina and Georgia.

It was the fourth consecutive year the closely watched growth metric has slowed in the Palmetto State.

South Carolina also lagged the broader U.S economy, which expanded by nearly 3 percent in 2018, according to the latest revision.

At least two experts who track business activity in the state are befuddled by the sluggish performance last year, when not one but two full-blown automobile plants began production in the Charleston region.

Mark Vitner, a Charlotte-based managing director and senior economist with Wells Fargo Securities, called the 1.6% estimate  "unbelievably soft.”

"I think it paints an overly pessimistic picture of the South Carolina economy," he said Thursday.

Vitner pointed to strong job growth trends, particularly in high-productivity industries such as manufacturing.

Other highlights included a nearly 8 percent increase in exports from South Carolina. The overseas-bound goods ranged from BMW automobiles made in Greer to Boeing 787 jetliners assembled in North Charleston.

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"You can't blame it on trade because the port is doing OK," said College of Charleston economist Frank Hefner, who also questioned the state's ranking. Hefner was trying last week to find out how the government came up with its estimate.

"There's no rhyme or reason here," he said.

That's not to say the South Carolina economy didn't face a hiccup or two last year. 

The 35-day partial government shutdown that started Dec. 21, for example, likely took a small 11th-hour bite out of the growth pie by putting thousands of federal workers and contractors on an unexpected hiatus. 

The as-yet-unresolved debate over tariffs also left a mark, namely because of the uncertainty it created for companies that rely on imports and exports, either as a customer or a shipper.

Mother Nature gummed up the wheels of commerce as well in 2018, courtesy of Hurricane Florence. The September storm unleashed destructive widespread floods and and led to mass evacuations in parts of South Carolina after coming ashore near Wilmington.

In Charleston alone, the tourism-related losses from Florence were pegged at about $110 million. Other industries that took it on the chin were the construction trades and agriculture. 

"I think that's probably a good explanation for some of it, but it sure doesn't explain all of it," Hefner said of the lackluster growth estimate. "I'd bet they revise it upward."

Vitner of Wells Fargo agreed, saying it's not uncommon for the number crunchers at the Bureau of Economic Analysis to "underestimate growth in the near term" and update their figures months down the road as they collect more data.

"I just have to believe that's the case here," he said. 

Contact John McDermott at 843-937-5572 or follow him on Twitter at @byjohnmcdermott

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