Analysts: Indiana To See Strong Economic Growth This Year

Two recently published studies suggest Indiana’s economy may remain strong despite sequestration.

GM worker

Photo: Bill Shaw/WTIU News

The Indiana auto industry is in good condition, boosting the state's economic growth.

Two separate reports from JP Morgan and BMO Capital Markets predict Indiana will see strong economic growth this year, even with federal budget cuts.

BMO forecasts Indiana’s GDP to rise 2.5 percent in 2013. JP Morgan’s report was more optimistic, with a projected 3.2 percent increase.

BMO Senior Economist Robert Kavcic says whatever the exact numbers turn out to be, manufacturing jobs from Toyota, Honda and Chrysler will likely be the primary catalyst for growth.

“The 2.5 percent is a little bit better than we’re seeing across the U.S., partly because the auto sector is in much healthier shape than it was two or three years ago and partly also because the impact of the sequestration is probably going to be a little bit softer in Indiana or relative to the other states,“ says Kavcic.

While the sequestration will directly affect unemployment benefits for over thirty thousand Indiana residents and cut funding to several state programs, JP Morgan head economist John Glassman says the state’s economy should still see exceptional performance.

“Indiana, Kentucky, Ohio, Michigan, all of the Great Lakes Region really, was kind of lagging the national economy in the last decade,” he says. “Now it’s leading the national recovery.”

Glassman says the state could see a slight setback because of sequestration, but those effects should not be long-lasting.

Nationally, the picture is not as positive. The U.S. Department of Labor announced today that 236,000 jobs were created last month alone. But Michael Hicks, the director of the Center for Business and Economic Research at Ball State University, notes the economy needs to create 150,000 jobs each month nationally for the economy to revitalize.

“Unfortunately, that’s being offset by people of all ages leaving the labor force in big numbers, so we actually saw a net decline of 130,000 in February, which means we’re seeing discouraged workers primarily exiting the labor force on a continuing basis,” he says.

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