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Economic experts predict strong U.S. economy in 2019

November 29, 2018

KOKOMO, Ind. – Economists are optimistic about the 2019 forecast — but caution that rougher weather may be ahead.

Faculty from the Indiana University Kelley School of Business presented the annual Economic Outlook Panel at IU Kokomo Wednesday, highlighting what to expect in the next year, from the local to the global economy. They spoke to more than 100 business professionals, government officials, and students from the Kokomo CEO program.

The experts report that economic indicators are positive, with the national economy projected to grow close to 3 percent in 2019. Employment will continue to expand, with inflation rising slowly. Indiana’s economic output is expected to grow at a rate of 3.2 percent, strongest in the first quarter.

Indiana is at full employment, and expected to remain that way through the year.

The panel included Alan Krabbenhoft, dean of the IU Kokomo School of Business. He was joined by Kyle Anderson, clinical assistant professor of business economics, Catherine Bonser-Neal, associate professor of finance, and Mark Frohlich, associate professors of operations management, all from the Kelley School of Business at IUPUI.

Krabbenhoft discussed the local economy, noting that unemployment remains low, and opportunities remain for further economic growth.

“Downtown development continues at a reasonably rapid pace,” he said. “The announcement regarding the building of a new convention center, together with a hotel, restaurant, and bar increases both the job potential during the construction phase, but also job prospects once the facilities are finalized and operational, and staffing begins. Certainly, the hope is that such attractions will generate additional revenue opportunities for other businesses in and around downtown Kokomo.”

He also examined the effects of the tariff and trade wars between the United States and China. The campus’ 14-county region’s largest industries are manufacturing and agriculture, both of which have been impacted by the ongoing dispute.

He noted that China has retaliated for tariffs placed on its products by the U.S. government by targeting states and regions most politically harmful to President Donald Trump and the Republican party.

Corn and soybean yields are up substantially, Krabbenhoft said, but market prices are down about 10 percent for corn and 22 percent for soybeans.

“If the trade war continues, or possibly even worsens, certainly farmers in the Midwest will continue to be among the hardest hit,” he said. “The impact will also be felt by domestic auto manufacturers and other users of steel. The tariffs on imported steel continue to put pressure on manufacturer’s bottom lines. Certainly, the question is, how long can they sustain rising costs before they are forced to pass such cost increases on to their customers?”

Other highlights include:

  • World output growth will be persistently robust at 3.7 percent, because of strong employment numbers and continued real wage growth. Escalating trade tensions, rising geopolitical frictions, and tightening global financing conditions create risks in the global outlook.
  • Unemployment at the national level may decline slightly, and the labor market will be increasingly tight.
  • Business investment will follow a strong 2018 with another good year. The U.S. housing sector will recover at least some from a disappointing 2018. Consumer spending, which has been strong this year, will decelerate, but still will remain a primary support for the expansion.
  • Energy prices will be relatively stable.
  • With the inventory of homes on the market likely to remain exceptionally low, residential construction in Indiana will expand for the fifth consecutive year, while the existing home market will have a tough time improving on the record sales tally posted so far this year.
  • The 30-year mortgage rate will climb above 5 percent for the first time since 2011. 

Community First Bank of Indiana is the presenting sponsor for the Economic Outlook breakfast. The City of Kokomo was a platinum sponsor, with Kokomo Grain Co. and Smith Financial as gold sponsors.

Indiana University Kokomo serves north central Indiana.

Last updated: 11/29/2018