Falling consumer prices are often a sign of a faltering economy, but Northeast Florida is experiencing deflation in an economy that seems to be picking up steam, according to the University of North Florida’s Local Economic Indicators Project, or LEIP.
LEIP’s consumer price index for the Jacksonville metropolitan area has declined for three straight months from August through October.
“Those who contemplate basic economic principles know that deflation can result from either a very weak economy or one that is growing strongly. We prefer and perceive that the latter is what is dominating as we approach the end of 2014,” the economic research organization said in its quarterly newsletter, LEIP-LINE.
“The driver has been lower energy prices, but there have alternatively been price reductions in new cars and trucks, alcoholic beverages, recreational products and educational books and supplies,” the newsletter said.
UNF economist Paul Mason said the supply of goods and services produced by Jacksonville area businesses seems to be ahead of demand, which is why prices are falling and the economy is growing.
“I happen to believe that the local economy is sufficiently strong,” said Mason, who is serving as acting dean of the Coggin College of Business while the university searches for a permanent replacement for Ajay Samant, who is taking a sabbatical.
Mason said LEIP’s consumer price data showed a continued broad decline in prices in November.
Besides the good news on prices, LEIP is also expecting to see positive news on employment in the Jacksonville area in the coming months.
“The summer was worse locally than nationally, which we attribute to the large influx of high school and college students into the local job market this past solstice,” LEIPLINE said.
“Now that fall is about to turn into winter, the unemployment rate has settled just below the national number for the last two months and is forecasted to continue to decline even into January,” it said.
LEIP’s index of local stocks has been rising, although not as fast as national stock averages, LEIPLINE said.
After weakness in July and August, the index rose in September and October.
LEIP’s index of leading economic indicators for the area has been “generally positive” in recent months, with the index close to a record high in October.
“Building permits have been pretty stagnant, but help wanted advertising is solid and consumer confidence is significantly higher than earlier in the year,” which has pushed the index higher, LEIPLINE said.
LEIPLINE also said the national economy seems to be moving forward.
“While many economists have concluded that oil and gasoline prices are not as important as they once were, it is difficult not to recognize that the acceleration of growth over the last seven months has corresponded to declining energy prices with significant correlations,” it said.
“While the European Union is flat and China, Brazil, and India along with other emerging nations are seeing their growth slow, the U.S. economy is acting in its historically driving role towards expansion.”
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