Economy will gain clarity after election
23 Oct 12
With just two weeks left in the campaign, Indiana business owners and consumers have a lot riding on the outcome of the presidential election.
“How things play out in the elections will have a great impact on how the economy turns nationally, internationally and statewide,” said Jerry Conover, director of the Indiana University Business Research Center at the Kelley School of Business. “Particularly the federal congressional elections are probably as important as who winds up in the White House.”
Conover acknowledges there have been some encouraging signs lately in consumer spending, as well as in the housing and financial markets, but he said business owners remain jittery over possible tax increases that could be triggered unless a compromise on federal spending and debt can be reached by Republicans and Democrats in Congress before year-end.
All the political uncertainty makes it doubly tough to forecast what 2013 holds in store for the national and state economies as well as for the Columbus area. But economists affiliated with the Indiana Business Research Center plan to give it their best shot, launching a 10-stop tour of the state next month to discuss the prospects for economic growth.
The research center will conduct its 2013 Business Outlook Panel on Nov. 2 in Columbus, touching on what’s ahead for exports, manufacturing and jobs. The session will begin at 7:30 a.m. at the Columbus Learning Center, 4555 Central Ave. It is co-sponsored by the Columbus Area Chamber of Commerce.
The Columbus metro area generally has outpaced Indiana as a whole in terms of job creation and business confidence this year with the local unemployment rate dipping to 5.4 percent (not seasonally adjusted) in September.
Meanwhile, the latest Indiana Business Research Center “leading indicators” index — a monthly report that attempts to gauge which direction the state’s economy is moving — reveals a sharp split between how consumers feel about their money status and how business leaders feel about the economy.
“Even while consumers may feel more optimistic about their future, businesses — small businesses especially — are more pessimistic,” the Indiana University report found last week. “CEOs’ assessment of current conditions remains weak, and they have grown increasingly pessimistic about the short-term outlook.”
The index, which attempts to gauge what’s ahead for Indiana over the next four or five months, rose from a numerical score of 99.8 in September to 100.1 for October. It was the first time the index edged above the 100-point level since the first quarter of 2008, due mostly to improved consumer spending, gains in housing and a lower unemployment rate.
“In summary, consumers are spending more and their confidence is rising. On the other hand, businesses are investing less and their confidence is slipping,” the index report concluded. “Consumers are responding to stability in home prices and the pickup in equity (stock market) prices. Businesses remain focused on the potential for a policy mistake coming out of Washington.”
The IU outlook tour will start Nov. 1 in Indianapolis and Bloomington, then arrive in Columbus the following day. Theresa Williams, clinical associate professor of marketing at Kelley School, will be among four panelists taking part in the Columbus session. Conover will be on other legs of the tour as it makes 10 stops statewide throughout November, although he won’t appear in Columbus.
“Both President (Barack) Obama and (his GOP challenger) Mitt Romney have talked about plans and attempts to create jobs, but no one has given enough details to let economists and business owners know for sure what will occur,” Conover said. “The fiscal cliff (of looming federal spending cuts and tax increases) has to be addressed before year end.”
If taxes rise to higher levels again, that could have a chilling effect on consumers and corporate investments.
The world stage also will play a role in how U.S. growth shapes up over the next 12 months. For instance, the fiscal health of countries in Europe and Asia will either drive or slow exports from U.S. and Indiana-based manufacturers.
“Slower growth in developing nations, which had been a big growth engine, also means less demand for U.S. exports, and if that’s going to continue to be the case it’s a bad sign,” Conover said.
Still, there have been brighter signs.
The state unemployment rate edged lower in September to 8.2 percent, a drop of 0.1 percentage points from a month earlier and a full percentage point better than September 2011.
In the Columbus area, the state Department of Workforce Development reported there are 2,114 more people employed than in September of last year, and the area’s labor force — those with jobs or actively seeking one — also increased year-over-year.
The Columbus area and Bartholomew County unemployment rates each were reported as 5.4 percent. Bartholomew Conty tied with Daviess County for third-lowest in the state, trailing only Dubois (4.9 percent) and Hamilton (5.3 percent) counties. Those local rates were not seasonally adjusted.
For Indiana overall, the number of people employed stayed virtually flat in September compared to a year earlier. The number of Hoosiers employed fell by just 175 to a total of 2,922,915, the Workforce Development agency said.
The statewide labor force increased by nearly 8,000 people compared to August’s revised data.
About the panel members
Experts on the 2013 Economic Outlook panel in Columbus are:
Theresa Williams, clinical associate professor of marketing at Indiana University’s Kelley School of Business
Michael Oakes, senior lecturer in finance, Indiana University-Purdue University Columbus
Elham Mafi-Kreft, clinical assistant professor of business economics at Kelley School of Business
Dubos J. Masson, clinical associate professor of finance at Kelley School of Business