You want to know why the U.S. economy hasn't slipped into a recession this year even though such a prediction was commonplace?
Well, it's because you keep spending.
Consumer spending is the driver of the American economy. People, and companies, keep spending money.
It hasn't meant gangbuster economic growth, and plenty of Americans continue struggling. Yet the U.S. economy has kept growing during the first half of 2023, and Florida's economy has outpaced the national economy in several important economic gauges.
GDP
In the first three months of the year, the national economy grew by 2%. Florida grew by an annual rate of 3.5% — a sizable difference when talking about hundreds of billions of dollars of activity. And Florida's growth was the fastest among the biggest states like California, New York and Texas.
The traditional economic drivers — real estate and retail — are fueling the growth. Soaring property values — even in the face of higher mortgage rates — help explain Florida's faster pace. Demand from people moving to the state coupled with a low supply of homes for sale have supported housing prices. (More on the impact of that on inflation below.) Consumer spending, health care spending and hotels and restaurants also helped.
Inflation
Okay, so what about inflation?
If you have been seeing reports about how inflation has been slowing down but not really seeing it in South Florida, you’re right. Nationwide, consumer inflation has been cooling off this year. Prices were up 4% in May compared to a year earlier — and that’s a big improvement.
But we are not cooling off in South Florida. In April, prices were 9% higher compared to a year earlier here. And it’s even worse when you take out energy and food prices. The so-called core consumer inflation — which is everything we buy except for energy and food — in South Florida was 10.5% —the highest in decades.
Why is inflation hotter here than the rest of the country?
Housing — home prices and rent.
The price of an existing single family home has actually fallen nationwide — down about 3% compared to a year ago. Compare that to essentially flat for a single family home in Broward County, up 1% in Palm Beach County and up almost 8% in Miami-Dade.
Remember, this is after average home prices have jumped by double digits in the past two years across the region. So housing is driving the sustained higher inflation we are experiencing here in South Florida compared to the nation as a whole.
Jobs
The sustained strength of the American job market has been a surprise to some, especially in the face of higher interest rates.
U.S. unemployment remains near historic lows. Florida is doing better than the nation, and the national numbers remain impressive. Nationally, the unemployment rate was at 3.7% in May. In South Florida — 2.4%. There were more people in the workforce compared to a year earlier, so this represents real job gains.
Outlook
As the economy has chugged along in 2023, there seem to be fewer forecasts for a national recession. Those pessimistic predictions that remain generally expect a short and shallow dip.
Florida has some tailwinds — people and businesses moving to the state, which drives demand for real estate and retail spending. State sales tax revenue in May was up almost 6%compared to a year earlier. Home prices remain strong despite higher mortgage rates. Tourists keep flocking to Florida. Disney has been going strong despite its fight with Gov. Ron DeSantis and future bookings on cruise ships also are strong, bringing more visitors to the area.
