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Robust Recovery Rolls On

by Mike Sepanic

It’s not often that executives offer uniform optimism about the future, but this unique alignment of leading and coincident indicators suggests that southern New Jersey is revving its economic engine to positive effect.

Approximately 200 executives attended the third 2004 Rutgers-Camden Quarterly Business Outlook on July 20, when five industry leaders delivered enthusiastic reports of an upbeat economy that shows few signs of slowing.

The panel agreed on a positive outlook throughout the balance of 2004. Rutgers-Camden business dean Milton Leontiades moderated the discussion.

This Rutgers-Camden School of Business event is co-sponsored by the Cherry Hill law firm of Flaster/Greenberg and the Chamber of Commerce Southern New Jersey

The following summarizes the report of each executive.

 

Economic Overview
Dr. Ted Crone, vice president of the Federal Reserve Bank of Philadelphia, suggested that New Jersey is well ahead of the national economic recovery, with statewide employment exceeding pre-recession levels, a trend replicated in most southern New Jersey markets.

Across New Jersey, job growth is on track to reach or exceed 2% in 2004, which will be better than the national average. Similarly, the state’s index of activity should hit 4% for the year.

Crone noted that two-thirds of the southern New Jersey firms responding to a Federal Reserve Bank of Philadelphia survey reported an increase in sales during the second quarter, a spike that he called the highest since the survey launched in 1991. “Growth is fairly widespread across South Jersey,” said Crone, who added that the regional employment index is at its highest since 2000. Only Vineland has not reached its pre-recession peak.

The Garden State outpaces the nation in terms of attracting new workers to the “eds and meds,” or the educational and health care institutions. The housing market remains strong, with no oversupply of stock. Crone predicts continued growth for southern New Jersey’s economy through the end of the year, and suggested that the region could benefit from a relocation of back-office functions from northern New Jersey to relatively cheaper South Jersey climate.

Current conditions: 85
Forecast: Better


Automotive
Mindy Holman, president and CEO of Holman Enterprises, <ED: hyperlink “Holman Enterprises” to http://www.holmanauto.com/> said that high gas prices and growing antipathy toward SUVs hasn’t slowed the hot pace of automobile sales in southern New Jersey.

She noted that sales of hybrid vehicles have improved, but suspects that such activity is due more to the increased availability of hybrids than the high cost of fuel. Dealer incentives likely will continue throughout the summer, while an abundance of new product offerings will enter the market during the summer and fall, thereby attracting more potential buyers into area showrooms.

Holman observed that a new law requires purchasers of new vehicles in New Jersey to buy four years’ worth of registration at the time of sale. Buyers also will pay a new fee on tires at that time. She said that dealers would need to work with buyers on such matters. She also noted that the automotive retail industry in southern New Jersey suffers from a lack of qualified technicians.

Holman summarized the coming six months as strong, thanks to a healthy economy, aggressive manufacturing, new product launches, and dealer incentives.

Current conditions: 75
Forecast: Better


Retail/Food
Jeffrey Brown, president of Brown’s Super Stores, Inc., cited fierce competition as a driving force in keeping southern New Jersey’s supermarket prices among the lowest in the nation.

Inflation has hit the food aisles, to be sure. Commodities such as milk, meat, and tobacco have seen notable price fluctuations, but Brown reported that overall supermarket inflation has remained relatively flat during the past few years.

He anticipates that the southern New Jersey supermarket environment will become more competitive still, as traditional supermarkets slow construction due to land availability and cost issues while “channel blurring” caused by drugstores deflects business to non-traditional food sales outlets. The entry of WalMart as a player in the region likely will drive smaller players out of business, and consolidations

The industry remains challenged by rising health insurance costs. “Grocers are labor intensive, and health care increases hit us disproportionately,” he said. Poor stock market performance and its negative impact on pensions also affect the industry. The high cost of fuel, rising expenses for new construction, and New Jersey state taxes are additional challenges, according to Brown.

Current conditions: 85
Forecast: Better


Manufacturing
Peter Dooner, president and CEO of the John Maneely Company, opened his report by noting that the New Jersey labor pool is “very, very good.”

He detailed the “China Effect,” which refers to the unexpected sharp demand for steel in the Chinese market during the past eight months. As a result, steel prices worldwide have more than doubled. Dooner observed that China has been growing its economy at a rate of 9% to 10% per year, with industrial growth of 15%, which leads to the demand for steel. “China is a huge country, but it’s relatively devoid of natural resources,” said Dooner, who added that the nation might be planning to build seven cities, which will only increase China’s appetite for steel.

Noting that the University of Maryland is home to a dormitory of Chinese students studying American culture, Dooner suggested that American students would do well to learn Chinese culture. “It’s a new paradigm,” he said.

Current conditions: 70
Forecast: Better


Banking
Warner Knobe, chair and CEO of The Bank, reported that southern New Jersey-based banks are enjoying increased deposits (10%), loans (15%), and earnings (9%) over 2003. A 23% decline in net charge-offs also is helping to strengthen overall bank asset quality.

Investment market uncertainties of the past few years increased bank deposits, a trend that is likely to reverse during the coming year as wary investors return their money to the market. Knobe anticipates that loan growth will be strong during the coming months, with competition for loan business producing favorable terms for consumers.

Some challenges exist for the banking industry. Knobe noted that untaxed credit unions have created an uneven playing field. “Whatever business you’re in, if one of your primary competitors does exactly what you do, and goes after the same customers, but doesn’t pay taxes, that’s a problem,” he said, adding that Congress would need to address the issue.

Mergers and acquisitions in the banking industry will continue, but Knobe predicts that smaller, community-based banks will always have opportunities. He additionally foresees increased job growth and strong housing development as 2004 continues.

Current conditions: 80
Forecast: Same


The next Outlook will be held on Oct. 19 at the Clarion Hotel and Conference Center in Cherry Hill. For more information, contact Samantha Collier.

 

 

 

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