Uncertainty might be the best way to describe the U.S. economy in the first half of 2025.
However, Alabama’s economy is still expanding, even though some corporate sectors are contracting due to uncertainty.
Those who spoke at Regions Financial’s economic outlook event in Huntsville on Tuesday agreed on that.
As we go into the fall, Regions Chief Economist Richard Moody, Chief Investment Officer Alan McKnight, and Sean Kelly, the Huntsville market’s executive and leader in commercial banking, shared their perspectives on the situation.
Why the ambiguity?
The economy is still strong, as evidenced by consumer spending and employment, but inflation is obstinately persisting.
When you combine it with tariffs’ hazy picture, it becomes challenging to assess consumer and business behavior.
First, let’s examine Alabama.
According to McKnight, Alabama is not experiencing the same level of corporate retreat as other U.S. regions are. For instance, industries that have remained resilient include shipbuilding, airplane manufacture, and motor manufacturing.
Additionally, Huntsville has emerged as a cost-effective substitute for other Southern metro areas like Nashville, Atlanta, and Charlotte, as mentioned by Moody’s.
The Rocket City is now less dependent on government contracts as a result. Lower living expenses and a highly qualified workforce remain alluring offers.
According to Moody’s, “we did not see that here, and the vibrant domestic migration really slowed in Atlanta.” In fact, we noticed a slight increase.
According to Kelly, companies are still making local investments even though there may be some degree of uncertainty on a national level.
According to Moody’s, uncertainty might not have as much of an impact as some had predicted earlier in the year.
In January, after several years of 3% to 4% growth with inflation remaining steady, experts were predicting 2% growth for the year.
Many anticipated that the Trump Administration would address budget and tax concerns, loosen some restrictions, and eventually implement the tariffs that President Trump had promised during the campaign.
According to Moody, it turned out to be somewhat the opposite.
Additionally, the scope of the Trump Administration’s choice to implement a broad range of tariffs on numerous countries simultaneously, then remove some of them while imposing additional ones, was not anticipated by economists, which confused the estimates.
However, the rate of layoffs has not increased, and prices have not yet widely reflected the levies.
Thus, 2% growth still seems reasonable in light of everything.
Although things haven’t gone exactly as planned, Moody stated that they still believe they will wind up in a similar position at the end of the year.
However, there is still a good deal of ambiguity. Consider The Home Depot’s earnings call from yesterday.
Although the home improvement store had earlier stated that it would not raise prices due to tariffs, it did announce that some product prices will increase.
According to The Wall Street Journal, the company stated that consumers are delaying major home renovation projects more than they are canceling them.
According to McKnight, one thing to keep an eye on during the remainder of the year is the amount of tariff-related costs that retailers are prepared to pass on to consumers. Moody concurred.
He stated, “We don’t expect them to continue taking that hit.” Yes, the economy has held up well, but the full effects of higher tariffs have not yet been felt.
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William Thornton
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