Kelley Economic Forecast Sees ‘Across The Board’ Growth

The most recent economic forecast from the Indiana University Kelley School of Business suggests the state’s economy will continue to outperform the rest of the nation. The results, released Thursday in Indianapolis and Bloomington during the first legs of Kelley’s statewide Indiana Business Outlook Tour, include the prediction that Indiana’s economic output will grow 3.2 percent in 2019. Additionally, forecast author and Indiana University-Purdue University Columbus Associate Professor of Finance Ryan Brewer anticipates "across the board" growth in areas such as jobs, income levels and wages.

The report suggests other categories that could expand in the state include numbers of establishments and gross state product. Brewer adds "the state economy appears poised to see its strongest growth in the first quarter of 2019, after which growth rates are expected to slow but remain strong through the end of the year."

Indiana Business Research Center Director Jerry Conover says, overall, the outlook paints a "relatively optimistic" picture for 2019. "We have seen that the tax cuts that were implemented this past year have sped up growth in the U.S. economy somewhat, so we think we’re going to be doing better than our long-run average in terms of economic growth, partly as a result of those tax cuts," he said.

Last year’s forecast predicted Indiana would grow by 2.8 percent and the U.S. gross domestic product would rise in the range of 2.6 – 3 percent. Conover, who tells Inside INdiana Business he will be retiring soon and the 2018 forecast is his last, says the 2018 estimations exceeded figures in the 2017 forecast. "Overall, even though we may have underestimated how strong growth would be," he said, "you can’t complain about the outcome."

Growth predicted in the upcoming year, Conover added, could come with some downsides. "The labor market will get tighter because there will be companies looking for workers and opportunities for people to hire on and, if that’s the case, then some firms may — even though it could bring the unemployment rate down — maybe (it will be) that some firms are going to have a harder time finding the kinds of workers they need since more people will have options as far as where to work," he said.

The forecast expects average monthly job gains of 200,000 and the labor participation rate to remain flat.

Additional highlights include:

• Consumer spending will continue to grow, although at a rate less than in 2018.
• Business investment will be good, but held back by trade concerns.
• Housing will resume growth with a small boost from the aftermath of hurricanes Florence and Michael. Elsewhere, including in Central Indiana, 30-year mortgage rates, nearly a full point higher than a year ago, could dampen enthusiasm for new housing and constrain prices.
• Government spending will be strong early in the year, but growth could slow significantly toward year end.
• The trade balance will show increasing deficits.

You can connect to more on the 2019 forecast by clicking here.