Indiana’s economy should start to recover this year from the damage of COVID-19, but the economy likely won’t fully rebound until late 2022 or early 2023, a Ball State University economist says.
“The return to long-term trend by 2022 is not a happy circumstance,” said Michael Hicks, director of Ball State’s Center for Business and Economic Research. The center presented its annual economic outlook this week.
Indiana’s gross domestic product shrank 4.6% last year, Hicks said, and he expects to see 2.2% growth this year and 2% growth in 2022. Under these assumptions, the state would end next year with a GDP just below its pre-pandemic levels. Results may vary depending on actual GDP performance.
Manufacturing, an important segment of the state’s economy, saw a GDP drop of 4.8% last year, with expected growth of 1.9% this year and 1.7% in 2022. In 2019, manufacturing was responsible for 26.9% of the state’s GDP and employed more than 16% of the state’s workforce.
The report also highlights the fact that some sectors of the economy were much harder hit than others and will take longer to recover.
- Arts, entertainment and recreation saw a GDP drop of 20.4% last year, with expected growth of 4.3% this year and 3.5% in 2022.
- Accommodations and food services saw a GDP drop of 13.1% last year, with expected growth of 4.3% this year and 3.7% in 2022.
- Transportation and warehousing saw a GDP drop of 11.1% last year, with expected growth of 3.5% this year and 3% in 2022.
Other sectors are likely to see a quicker recovery, the report says, in part because of pent-up demand. For instance:
- Healthcare saw a GDP drop of 6% last year, with expected growth of 3.8% this year and 3.4% in 2022.
- Professional services saw a GDP drop of 3.2% last year, with expected growth of 2.9% this year and 2.7% in 2022.
- Utilities saw a GDP drop of 0.2% last year, with expected growth of 1.9% this year and 1.8% in 2022.
On another metric, real personal income, Indiana saw 5.5% growth last year. Hicks said this was due to federal coronavirus relief efforts, which included individual stimulus payments. Personal income growth is expected to be 0.9% this year and 1% in 2022, Hicks said.
The report also argues that the economic downturn was caused by the human response to the threat of disease—not government stay-at-home orders. As evidence of this, the report says, Indiana’s overall consumer spending had already declined by 20.4% when Gov. Eric Holcomb imposed a statewide stay-at-home order on March 24.
“So the disease and failure to control the disease caused this downturn, not government shutdowns,” the report says. “Arguments to the contrary suffer from an absence of empirical evidence.”