Modest economic gains forecast for Indiana

A struggling national economy will continue into 2016, although Indiana is expected to fare a little better, economists say.

Difficult international conditions, such as the slowdown of China’s economy, and revisions to 2013-14 data from the Bureau of Economic Analysis have muted hopes for significant improvement in the national economy, according to a forecast from the Indiana University Kelley School of Business.

Any economic gains nationally are more likely to be modest, economists said.

“Looking at the year ahead, we see little reason for any real optimism,” said Bill Witte, associate professor emeritus of economics at Indiana University, in a media release. “We think the economy can match the past year or perhaps do a little better.”

Witte was among panelists who shared their thoughts Thursday morning at the Columbia Club in Indianapolis. Panelists will travel to different Hoosier cities through Nov. 20 to present their national, state and local economic forecasts.

An economic outlook breakfast and panel discussion in Columbus starts at 7:30 a.m. Thursday at the Columbus Learning Center. Ryan Brewer, assistant professor of finance at IUPUC and one of four panelists, will present the forecast for Columbus.

Hope for Hoosiers

Indiana’s outlook appears slightly brighter because its gross domestic product is expected to grow at a somewhat faster rate than the nation’s going into 2017, said Timothy Slaper, research director of the Indiana Business Research Center.

Indiana’s economic growth can be affected by the demand for Indiana’s goods and services from outside the state, he said.

“Given Indiana’s status as a manufacturing powerhouse, its GDP (gross domestic product) could be boosted by strong demand for industrial machinery and automobiles,” Slaper said.

He also predicts that the state’s unemployment rate will continue to drop until it is well below the 4.5 percent mark of July 2007.

The unemployment rate in Jackson County was 3.5 percent in September, down from 3.7 percent in August and 4.6 percent a year earlier. Bartholomew County had 3 percent in September, down from 3.2 percent in August and 5.4 percent in September 2014. The only Hoosier counties with a lower September jobless rate than Bartholomew were Dubois in southern Indiana at 2.8 percent and Hamilton just north of Indianapolis at 2.9 percent.

A tight labor market and rising interest rates could temper expansion plans of Hoosier companies, said James Smith, senior lecturer in finance at the Kelley School of Business.

Also, weakening international markets could lead to declining sales and possible cutbacks of major manufacturers in central Indiana, Smith said.

That’s already happened locally. In late October, Columbus-based engine maker Cummins Inc. announced it will cut 2,000 salaried jobs worldwide in the coming months because of slack global demand. Some of those cuts are expected in Seymour where the company recently opened a state-of-the-art technical center for the company’s high-horsepower division. The division’s world headquarters is located here.

Tempered expectations

China’s slowing economy has hampered economic growth in other emerging economies, and the instability of its currency has negatively affected U.S. imports, the Kelley School of Business forecast said.

Significant economic growth nationally will happen only if certain sectors improve, Witte said. Consumer spending and housing have been solid but have limited upside. Business investment, international trade and government spending are unlikely to fill the void, he said.

Business investment isn’t expected to increase significantly, and governmental spending will be limited by budgetary constraints, the forecast said.

Also in the forecast:

  • Stock market values will show modest performance in 2016.
  • Job growth nationally is expected to be at a much slower rate than compared with 2014.

“In part, this deceleration will reflect a labor market that is approaching full employment,” Witte said. “This also means that the steady decline in the employment rate, which has been in place since late 2011, will show.”

Witte added that the national unemployment rate will be just below 5 percent by the end of 2016.

If you go

What: Economic Outlook Breakfast

When: 7:30 a.m. Thursday, panel presentations at 8, question-and-answer session to follow.

Where: Columbus Learning Center, 4555 Central Ave., Columbus.

Why: To discuss how changing economic conditions will affect business and public policy decisions — globally, nationally, statewide and in Columbus — in the coming year.

Who: The event features four panelists: Ryan Brewer, assistant professor of finance, IUPUC; Jerry Conover, director of the Indiana Business Research Center; Kyle Anderson, clinical assistant professor of business economics, Indiana University Kelley School of Business; Charles Trzcinka, professor of finance, Indiana University Kelley School of Business.

Cost: $15 for continental breakfast

Register: Call 812-379-4457 or go online at columbusarea.chambermaster.com/events/details/economic-outlook-breakfast-867.

Pull Quote

“Looking at the year ahead, we see little reason for any real optimism.”

Bill Witte, associate professor emeritus of economics at Indiana University

Author photo
Kirk Johannesen is assistant managing editor of The Republic. He can be reached at johannesen@therepublic.com or (812) 379-5639.