Staff Photo by Robin Rudd / U.S. Energy Secretary Jennifer Granholm and others celebrate the retrofitting of a former Alstom manufacturing plant for use by Novonix in late 2021. The plant makes materials for lithium-ion batteries for electric vehicles, and Novonix is looking at making another $1 billion investment in Chattanooga.Nearly half of Tennessee business leaders said they think the U.S. economy will worsen over the next year, but most think the chances of a recession are lower in Tennessee than the nation as a whole, according to a survey by the University of Tennessee released Wednesday.
Among the business respondents to the August survey, 73% said they expect Tennessee's economy will outperform the rest of the nation over the coming year. Amid concerns over labor shortages, inflation and higher interest rates, about 22% of the businesses surveyed predict that economic conditions will worsen in Tennessee over the next year compared to 44% who expect the U.S. economy to worsen in the next 12 months.
"The optimism about our state's economy, as well as the lowered fear of recession, are both very encouraging to see," Don Bruce, director of the Boyd Center for Business and Economic Research at the University of Tennessee in Knoxville, said in a report on the survey results. "That confidence among business leaders is a reflection of the work our state is doing to encourage strong economic growth in Tennessee."
Since 2019, Tennessee has landed nearly 500 new or expanded business projects, representing commitments for 87,000 new jobs and $33 billion in new capital investment, according to the Tennessee Department of Economic and Community Development.
Survey results
Expectations for the Tennessee economy over the next 12 months:
— Considerably better: 25%.
— A little better: 48.5%.
— About the same: 19%.
— A little worse: 7%.
— Considerably worse: 1%.
How do businesses say Tennessee's state government is doing?
— Excellent: 15%.
— Good: 54%.
— Fair: 22%.
— Poor: 8%.
— Not sure: 1%.
Business expectations in Tennessee over the next 12 months:
— Considerably better: 13%.
— A little better: 35%.
— About the same: 30%.
— A little worse: 21%.
— Considerably worse: 1%.
Source: Boyd Center for Business and Economic Research, University of Tennessee survey of businesses, August 2023.
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Tennessee recruited its biggest new investment ever in 2021 when Ford Motor Co. announced plans for a $5.6 billion electric vehicle and battery production complex in West Tennessee. Spurred by new federal incentives for domestic manufacturing and green industries like electric vehicles and batteries, companies committed to about $9.1 billion of capital investments in the 12 months ended Aug. 28, according to state figures. A Novonix battery plant on Chattanooga's Westside could spur another $1 billion battery facility at Enterprise South in Chattanooga.
Most of the major new investments were in the electric vehicle, battery or other projects aided by the new federal investment incentives offered in the Inflation Reduction Act, passed in 2022 by Democrats in Congress.
Over half of respondents attributed Tennessee's economy to good business investment in the state. Nearly 70% of the business leaders said the state's government is doing either an excellent or good job of creating a solid business environment.
The business leaders surveyed across Tennessee in August were generally favorable in their outlook for their own businesses in Tennessee, with 48% expecting conditions to get better in the next 12 months, compared with 30% who expect things will stay about the same and 22% who think conditions will worsen in the state.
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"Tennesseans are generally more optimistic about conditions here in their own state than they are nationally," Tennessee Chamber of Commerce President Bradley Jackson said in a telephone interview Wednesday. "It's a little like how many people view Congress: They don't like Congress as a whole, but they love their own congressperson. People on the ground here see the economic activity around them with relatively strong sales and the population growth coming to our state."
Jackson, whose statewide chamber represents businesses with about 500,000 employees in Tennessee, said businesses continue to struggle to get enough workers and cope with higher prices, wages and supply chain problems. Seven out of 10 respondents in the UT survey reported that there is an insufficient supply of appropriately trained workers in Tennessee.
"But overall, I think the basis of our economy in Tennessee remains strong and is still growing with more industry and people moving to our state," Jackson said.
Business leaders were divided over how the U.S. economy is now compared to the last year with 38% believing it is worse and 34% thinking it is better.
Contact Dave Flessner at [email protected] or 423-757-6340.
