Amid the many festivities and celebrations of New Years (on Paradise Island, in my case), we generally find a moment or two hidden between parties and football games to think about the coming year, perhaps even going so far as to venture a resolution or two. As I go through this exercise while wearing my economist’s hat, I see several good things likely to occur in 2004. (As for my personal resolutions, I will keep those to myself; that way, only I will know if I am less than successful.)
First, 2004 will be the year when business investment returns with gusto, thus giving legs and staying power to the current economic expansion. It will also be the year when hiring begins to show up in earnest, thus fueling consumer confidence and spending. Nothing gets the economic juices flowing more than a major dose of new employment.
Interest rates will likely remain moderate, although a modest uptick may well be in the offing. I was something of a chronic Fed-watcher in another life (fortunately, there is a cure), and I can still spot certain dynamics a mile away. Around early summer, although there will be no apparent signs of permanent inflation, the healthy economy will cause Federal Reserve policymakers to begin to think they might need to raise rates sometime near the end of the year. With an election approaching, however, they will not want to pull the trigger later in the year (lest they be accused of playing politics). Thus, they will decide that the summer is their last chance, and they will do it. Let’s hope the Fed makes a New Year’s resolution to “chill,” but I certainly wouldn’t bet on it. In any case, rates should remain low by the standards of history.
We can also expect our miraculous technology machine to keep plowing along in 2004. New medical advances, electronic gadgets, and next-generation products will amaze us and make our lives better.
Another likely benefit in 2004 will be a spate of corporate locations to the Lone Star State. Our new economic development tools will translate into massive investments in the future prosperity of Texas.
The next year should also bring good things to those long-suffering investors in the stock market. The fundamental profitability that comes from opening markets and enhanced efficiency should spur equity values to continue their recent upward movement.
Many of our core sectors in Texas should also see better days. Rising orders and declining inventories should foster increased production of computers, telecommunications equipment, and microelectronic components. At the same time, tourism should see a sharp increase in response to major events and new venues. Retailers should also sustain the momentum of a strong Christmas season well into 2004.
The coming year may see the most sweeping overhaul of our antiquated tax system to occur in decades. Through the difficult task of reforming school finance, we have an opportunity to craft a more fair and business-friendly fiscal environment than at any moment in our storied saga.
That is not to say that everything will be rosy throughout the year. The economy always has its ups and downs, surprises, and general unpredictability. We have challenges to confront in terms of budget deficits, trade deficits, and increasing global competition. When examining all of the available information, however, 2004 is shaping up to be a year of prosperity and promise. I hope that your own resolutions involve taking advantage of the many opportunities that are before us. In any case, I wish you health, happiness, and bounty in 2004. Happy New Year!