Alabama Economy Expected to Grow by 3.3 Percent in 2005, Matching Projected U.S. Growth Rate

More jobs will be created in Alabama in 2005 in non-agricultural employment, but the textile and apparel industries will once again take it on the chin, University of Alabama economic experts predict.

The Alabama economy will grow by 3.3 percent next year, matching the expected national growth rate but below the state’s 2004 growth rate of 3.7 percent, says Ahmad Ijaz, econometric analyst in UA’s Center for Business and Economic Research.

The U.S. economy grew by approximately 4 percent in 2004 and is estimated to grow by 3.3 percent in 2005.

“For 2005, we think total non-agricultural employment in Alabama will increase by 1.4 percent, adding over 25,000 new jobs,” Ijaz said. “Most of the job growth is expected to be in retailing and other services-related businesses, primarily professional and business services. Most of the job growth in manufacturing is expected to be in automotive related industries. While durable goods manufacturing is forecasted to add new jobs, nondurable manufacturing will continue to lose jobs in 2005, with most of these job losses being in textiles and apparel industries.”

Residential construction is expected to remain strong at least through the first half of the year, Ijaz said. As interest rates gradually increase, residential construction activity, including mortgage refinancing, is expected to decline slightly compared to 2004.

Consumer spending is also forecasted to be lower in 2005 than in 2004. However, business spending, particularly on equipment and software, is expected to remain strong, increasing by close to 7 percent. Despite higher energy prices, the overall inflation level, as measured by the consumer price index, is expected to remain low, although Ijaz said consumer prices should increase by 2 percent in 2005.