A look ahead: Florida’s industries and markets
By Chris Dhanraj, managing principal of investments, CliftonLarsonAllen Wealth Advisors
We made it through 2020 and businesses are looking toward a post-pandemic world with cautious optimism. We are frequently asked what trends to watch across both national and state business landscapes. Here are three of them.
How have Florida businesses fared in the pandemic?
Compared to national benchmarks, Florida businesses have withstood COVID-19’s challenges relatively well. After a 2020 contraction of 2.4%, Florida’s real gross state product is expected to rise by 4.9% in 2021, according to the Institute for Economic Forecasting at the University of Central Florida. (Florida Economic Forecast, Amendment 2 and BOGO | University of Central Florida News (ucf.edu)) This is better than the national benchmark showing a -5.6% Real GDP contraction in 2020, and a 4.2% recovery in 2021, according to the Congressional Budget Office. (Interim Economic Projections for 2020 and 2021 | Congressional Budget Office (cbo.gov)
Unquestionably, the pandemic battered businesses in the first half of 2020 — Florida’s unemployment rate spiked to 13.8% in April 2020 (from April 2019’s rate of 3.3%). However, the Bureau of Labor Statistics shows that by the end of October, the stimulus relief and recovery efforts brought unemployment down to 6.4%.
Which industries are growing — and which aren’t?
Let’s start with the good news: manufacturing and services industries are growing. With the December 2020 Institute of Supply Management reporting a purchasing managers’ index (PMI) of 60.7 (any number above 50 indicates growth), manufacturing has seen its eighth consecutive month of growth. Services continued a seven-month growth streak, with a PMI of 57.5.
On the other hand, three industry categories are still reporting contraction due to COVID-19: accommodation and food services; rental and leasing and arts, entertainment, and recreation. These industries may see some relief with early-2021 catalysts, e.g., the hosting of Super Bowl LV in Tampa or bipartisan support of continued government stimulus like the Economic Aid Act, which provides more flexibility for new, and existing, Paycheck Protection Program (PPP) loans. Read our recent article to understand how your company can benefit from the Economic Aid Act and greater flexibility of PPP loans.
How are local businesses moving forward?
Despite new fiscal stimulus, our discussions with businesses suggest that companies are focused on controlling expenses to deliver bottom-line profits, as the future remains uncertain. Between the possibility of new tax legislation — proposed during President Biden’s campaign — that would increase the corporate tax rate to 28% and the recently passed amendment to gradually raise the state minimum wage, from $8.65 to $15 by 2026, hiring trends in Florida may be subdued as businesses prioritize profits.
Our conversations with small, and large, business owners suggest a few key takeaways. Virtual technologies (e.g., videoconferencing, web-based trade shows) are expected to remain an important component of the client engagement process across industries. Efficiency is being sought in the management of employee retirement plans, with increasing consideration of the outsourcing of key C-suite positions. While many companies may want to ratchet back their location costs during the pandemic, Florida businesses will have a hard time renegotiating office leases as e-commerce continues to rise while out-of-state businesses look to relocate to the Sunshine State.
What does this mean to you and your business?
Some of the behaviors and trends we are witnessing, at the business level, are comparable with what we are seeing with individuals: the desire to reduce complexity, and expenses, in investment portfolios. The optimism many people have for a post-pandemic market recovery compels them to put money back to work, rather than sit on the sidelines with cash.
Finally, it’s not just business owners who have a strategic vision — increasingly we see clients adopt a goals-based approach to investing, whether it be for growth, income or diversification. Look for an accounting firm partner that has seamless processes in order to help their clients evaluate their tax, audit, outsourcing, investment and retirement considerations; offering a holistic roadmap to navigate more confidently 2021 and beyond.
Chris Dhanraj, Managing Principal of Investments, CliftonLarsonAllen Wealth Advisors, LLC
[email protected]. 813-384-2737
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment or tax advice, or opinion, provided by CliftonLarsonAllen LLP (CliftonLarsonAllen) to the reader. For more information, visit CLAconnect.com.
CLA exists to create opportunities for our clients, our people and our communities through our industry-focused wealth advisory, outsourcing, audit, tax and consulting services. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.