IU panel pessimistic about 2016 economy

Indiana University economists on Thursday tamped down expectations for 2016, saying it’s unlikely the economy will break out of its “post-recession 2 percent slog.”
 

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

Witte and fellow economists with IU’s Kelley School of Business were set to deliver their annual economic forecast Thursday morning at the Columbia Club downtown. 
 

They expect real output growth in 2016 will average about 2.5 percent, which will be a little better than this year, but only equal to 2014.

Reasons for the panel’s pessimism include output in the third quarter of an annual rate of just 1.5 percent, which was less than half the rate in the prior three-month period. The national labor market has been growing by an average of 167,000 each month, barely half the rate at the end of 2014.

The slowdown in China’s economy has had an impact on economic growth in other emerging economies, and instability of its currency has severely affected U.S. exports, a bright spot in previous years.

 

One potential bright spot is that Indiana, which has trailed the nation in gross domestic product growth three of the past four years, likely will grow at a slightly faster rate into 2017, said Timothy Slaper, research director of the Indiana Business Research Center in the Kelley School.

“While Indiana-specific conditions can affect economic performance, Indiana’s economic growth can also be affected by the demand for Indiana’s goods and services from outside the state,” Slaper said. “Given Indiana’s status as a manufacturing powerhouse, its GDP could be boosted by strong demand for industrial machinery and automobiles.”

On the other hand, weakening international markets could lead to declining sales and possible cutbacks at major central Indiana manufacturers, said James Smith, senior lecturer in finance.
 

That trend already is starting to play out. 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.