IU panel predicts modest 2005 economic growth

Economists with the Kelley School of Business predicted an expanding economy for 2005 last Thursday, but at a slower rate than in 2004.\nThe Business Outlook Panel, a group consisting of four economic experts from IU, is an annual forecast which predicts the economic activity for the world, nation, state and city for the upcoming year. This year's panel included R. Jeffery Green, co-directorof the Indiana Center for Econometric Model Research and Business Economics and Public Policy professor; William Sartoris, professor of Finance; Jerry Conover, director of the Indiana Business Research Center and Thayr Richey, president of the Strategic Development Group.\nGreen said 2004 was a decent year for the U.S. economy, citing increases in real output, consumer spending and exports as well as low inflation and unemployment numbers. However, he warned the economy is still struggling.\n"Despite that good news, an awful lot of us have real concerns about the economy and where it's going," Green said at Thursday's panel discussion in Indianapolis. "The reason we have those concerns is even though the economy grew at a fairly robust rate, the stresses and strains on the economy grew at least as fast."\nGreen said he believes oil prices will continue to climb in 2005, which will lead to an increase in inflation, causing higher interest rates. He also predicted the trade deficit and federal deficit are going to put pressure on both the interest rates and the exchange rate of the dollar. All of these factors will lead to a slightly slower economy.\nHowever, he stressed the U.S. economy is not in any serious danger in 2005.\n"Now we aren't expecting a recession and we aren't experiencing a gloom and doom scenario for next year," he said.\nIn looking at financial markets, Sartoris said he was impressed with the way they have held up in the face of a variety of troubling situations over the past three years, such as the terrorist attacks of Sept. 11 and the corporate bankruptcies such as Enron and most recently ATA.\n"The bad news is there's still lots of major challenges facing the markets as we look ahead," Sartoris said.\nSartoris said he remained optimistic about the upcoming year in terms of financial markets, citing a strong demand for housing and continued foreign interest in U.S. securities.\nSpeaking specifically on Indiana's economy, Conover said the economic factor Hoosiers were the most interested in was employment. He said since 2003 the state has gained 28,000 payroll jobs. \n"That's very slow growth over the past 14 or 15 months, but at least it's growth, which is something refreshing given where we've been for a while," Conover said.\nStill, Conover said the state has seen nine consecutive months of higher employment than it had a year earlier. One of the state's growing employment sectors is construction, and Bloomington has been directly a part of this growth.\n"It's like walking out and seeing giant mushrooms after a spring rain. There are these brand new buildings in downtown Bloomington where did they come from?" Richey said, who spoke on Bloomington's economy. "It's a great sign of vitality. It's obviously a manifestation of the long-term plan of the city of Bloomington and it really has lots of promise for a more vital Bloomington economy."\nAlthough there was growth in construction and other sectors, including education and health, government and business services, Indiana's main sector, manufacturing, accounts for 19.4 percent of employment, but Richey said that number will continue to drop as companies continue to outsource and improve productivity.\n"We will continue to lose manufacturing jobs," Richey said.\nStill, Conover said he expected another year of increased employment in Indiana.\n"We're expecting a modest upturn in Indiana by this time next year, forecast an increase in employment by about .5 percent, that's about 15,000 jobs," Conover said.\nThe unemployment rate is predicted to remain stationary at 4.8 percent.\nThe panel is scheduled to speak around the state through Nov. 23.\n-- Contact senior writer Kathleen Quilligan at kquillig@indiana.edu.