Miami-Dade County economic activity expanded at a strong pace throughout 2018, outpacing payroll employment growth of the National economy. A pro-growth business climate and positive external factors such as a pick-up in the National economy were key components.

 

The New Year, 2019, is bringing “headwinds” that are likely to slow the pace of growth in the Miami-Dade Economy (MDE). Among these “headwinds” are the following:

 

• U.S. economic activity is slowing down. This implies a slower pace of “exports” to the National economy from the MDE such as a modest decline in the record number of visitors enjoyed in 2018, and slower expansion in real estate services and other services sold nationally. The U.S. economy is projected to grow around 2 percent this year, down from the solid 3 percent expansion in the second half of 2018.
• Federal Reserve (FED) Policy has become more restrictive. The FED is “unwinding” its $4 trillion plus of U.S. Treasuries and Mortgages-Backed Securities (MBS) that it purchased during the severe recession of 2007 and the slow recovery up to 2016. The balance sheet “unwinding” impacts liquidity in the financial markets, leading to a higher level of interest rates relative to the “easy money” period of the past nine years. As interest rates rise, albeit at a moderate pace, the important real estate sector of the MDE, both residential and commercial, will slow compared to the strong growth of the last few years.
• Finally, the international economy, another key driver of the MDE, slowed in 2018, and further declines in its rate of growth are forecast this year. This will impact, together with a strong U.S. dollar exchange rate, the MDE exports of goods and services to key markets in Europe, Latin America and Asia among other regions.

 

The Table on the next page, broken down by international regions, shows the forecast of slower growth expected this year among important trade and investment partners of the MDE.

The United Kingdom, the second largest economy in the European Union, is experiencing a sharp slowdown due to difficult BREXIT negotiations. This, in turn, impacts its ability to buy goods and services from the MDE, the flow of visitors and Foreign Direct Investment (FDI).  This adverse development also slows other key European economies like Germany, Italy and France.

 

China, the second largest global economy, Mexico and Costa Rica are also showing signs of slower growth. Argentina is likely to experience another year of economic recession. On the positive side, the large economy of Brazil, a key trade partner of the MDE, is forecast to enjoy stronger economic expansion under the new pro-growth policies of the Administration of President Jair Bolsonaro. Finally, the Dominican Republic and Peru are forecast to continue expanding at a strong pace.

 

International Drivers Impacting the Miami-Dade Economy GDP Growth 2016-2019
Region/Country	2016	2017	2018E	2019F
Europe
Germany	2.2	2.5	2.0	1.9
United Kingdom	1.8	1.7	1.4	1.0
France	1.1	2.3	1.6	1.5
Italy	1.0	1.5	1.2	1.0
Spain	3.2	3.0	2.7	2.0
Asia
India	7.1	6.7	7.3	6.5
China	6.7	6.9	6.6	6.0
Korea	3.0	3.1	2.8	2.5
North America
Canada	1.4	3.0	2.1	2.0
Mexico	3.0	2.0	2.2	1.5
Latin America and Caribbean
Brazil	-3.4	1.0	1.4	2.5
Colombia	2.0	1.8	2.8	3.6
Chile	1.3	1.5	4.0	3.4
Peru	4.0	2.5	4.1	3.5
Argentina	-1.8	2.8	-2.6	-1.6
Dominican Republic	6.6	4.6	6.4	5.0
Costa Rica	4.2	3.3	3.3	3.5
Sources: International Monetary Fund (IMF) World Economic Outlook, Oct 2018. Forecast (F) by The Washington Economics Group, Inc. (WEG)

 

In essence, the U.S. and international economic outlooks are less favorable to the MDE economy this year. While a U.S. recession is not expected by most economists in 2019, slower growth and moderately higher interest rates will likely slow the expansion of important sectors of the MDE such as residential and commercial real estate, exports of goods and services, visitors, retail sales and wholesale trade.

 

 

By: Dr. J. Antonio Villamil  Founder and Senior Advisor The Washington Economics Group, Inc. (WEG)