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IU: State still poised for growth

March 18, 2010

Still waiting for the state economy to improve? Don’t despair. The Indiana Business Research Center is standing by a forecast of sustained economic growth beginning this summer.

The reiteration comes as the center, which is part of the Kelley School of Business at Indiana University, announced today that its proprietary index for predicting future economic activity in the state weakened a smidgeon in February. A release and chart is available here.

The index slipped to 96.2 after standing at 96.3 in December and January. In other words, most laymen would conclude the index has flattened following a slow-but-sure climb for a number of months. (The benchmark of 100 was set in summer 1997.)

The Leading Index for Indiana, which is compiled from reports on such key areas of the economy as automotive and construction, predicts activity five to six months in the future.

The center’s director of economic analysis, Timothy Slaper, cautions against reading too much into the flattening. Sources in the index are subject to revision, Slaper says, and, fortunately, no warning signs have cropped up in a year. So there’s nothing serious on the horizon to worry about; the larger point is when growth will start and what that growth will look like.

Indeed, the index sources have been maddeningly contradictory. In February, manufacturing and retail sales expanded, but homebuilder confidence and consumer sentiment fell.

The center’s confidence in renewed growth this summer is fed partly by consumers’ need to replace worn goods. People can’t keep driving the same cars forever, Slaper points out.

When it comes, the growth will be anemic at first and then accelerate to a moderate pace by the end of the year, Slaper says. Job growth will come later.



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