What Could Disrupt the Southeast?

ATLANTA—East Coast states are doing well while other regions dependent on energy or the ports—such as California—suffer. Job numbers from the mid-Atlantic down to Florida continue to be very strong compared to other parts of the country.

Will this trend continue? GlobeSt.com caught up with KC Conway, credit risk manager and chief valuation officer at SunTrust Bank, to get his thoughts. In short, his answer is yes—he does expect this trend to continue.

“The best example of this shift is the latest GDP data from the Bureau of Economic Analysis translating the national GDP data down to the state level,” Conway tells GlobeSt.com. “Dissecting regional and state data is especially helpful to understand the growth occurring in the Southeast.”

At the state level, California, Texas and New York still rank first, second and third, respectively, in real GDP dollars, Conway noted, but Florida, Georgia, and North Carolina together surpass both Texas and New York. And, he adds, if one aggregates the key southeastern states of Florida, Georgia, North Carolina and Virginia that have GDP growth of 2.5% or more, the equivalent of California's GDP is produced. As he sees it, these are noteworthy correlations and support a growth strategy for commercial real estate lending in the SunTrust footprint.

“Another advantage of the East Coast is that its ports are materially outperforming its competitors on the West Coast, indicating that the supply-chain shift from a West Coast-concentric model to an East and Gulf-Coast one is underway well in advance of the completion of the Panama Canal expansion project,” Conway says. “Industrial real estate stands to benefit and is supported by the most recent port container statistics in which East Coast ports are reporting 11.5% container growth.”

What could disrupt this growth in the Southeast? Conway says the biggest threat is global central bank monetary policy and what happens to the value of the US dollar and other trading partners' currency.

“As the US dollar strengthens against other currencies—like the euro—our products and exports become more expensive,” Conway says. “This delicate balance is under pressure and will be further strained if the Fed raises interest rates too quickly while other global central banks are still lowering rates in an effort to devalue their currencies. The Southeast is a material manufacturing and export center for the US economy and it would suffer if the US dollar continues to strengthen compared to other currencies.”