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Indiana Forecast Predicts Weaker Economic Growth in 2020

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Friday, November 8, 2019   

INDIANAPOLIS – New research predicts both the Indiana and U.S. economies will continue to grow in 2020.

The Indiana University Kelley School of Business presented its annual Business Outlook forecast in Indianapolis yesterday, which expects the national economy to expand at a rate of about 2%.

Ryan Brewer, associate professor of finance at Indiana University-Purdue University Columbus, notes Indiana's growth will be weaker, at around 1.25%.

"In Indiana, there's limited growth to the upside because the labor markets are so tight, and we do have the possibility of a cooling in manufacturing,” says Brewer. “And if that would happen, Indiana could end up in an output contraction next year."

National economic growth is expected to be slower than in 2018, which researchers attribute to the continued trade frictions with China, Canada and Mexico, as well as overall political dysfunction in the U.S.

Associate Professor Emeritus of Economics at I.U. Bill Witte notes national unemployment dropped to 3.5% a month ago, the lowest it's been in 50 years. And he says the forecast has it staying below 4% through the end of 2020.

"That means that we'll continue to generate jobs,” says Witte. “But we think at a slower rate because there just aren't as many workers. Population isn't growing all that rapidly, and we sort of used up any excess supply of people that were laid off during the recession 10 years ago."

The outlook also predicts interest rates will remain low for 2020. The Federal Reserve recently cut interest rates for the third time in 2019, and Witte expects it to leave them alone.

"And that's a pretty good situation for consumers, at least those that have relatively good credit records,” says Witte. “Mortgage rates will be probably just right around 4% or a little bit below, and you should be able to get reasonably attractive car loans and things like that."

Brewer adds that the outlook is likely a best-case scenario for 2020, and could easily be affected by consumer behavior and policy decisions.

"As long as people continue to spend, and if we get a trade deal worked out and the USMCA is ratified,” says Brewer, “or at least, trade is occurring with Canada and Mexico in a way that would be consistent with that arrangement, then that bodes well for next year."

Researchers will present the 2020 outlook in several other Indiana cities over the next couple of weeks. The full outlook for 2020 will be available online in December in the Indiana Business Review.


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