The 2018 economic forecast is a moving target, economists said at a forecast luncheon Thursday afternoon.
Many factors have changed in the last few months, said Willard Witte co-director of the Center for Econometric Model Research. He and others expect more surprises to come through the year.
They attempted to give their best predictions during the luncheon, held by the Jasper Rotary Club at KlubHaus 61. Here is a breakdown of their overall thoughts and projections.
“The past two months have changed the outlook a lot,” Witte told the audience.
He noted that tax changes approved by the federal government in December included extensive changes to the business tax structure. And two weeks ago, the two-year national budget added about $150 billion each year in new government spending, he said.
In November, Witte was predicting that the economy would grow about 2.5 percent in 2018, which he said was comparable to 2017.
“My forecast today is that the 2018 growth is going to be 3.7 percent,” Witte said, causing many in the audience to verbally express their surprise.
In November, he predicted that there will be about 170,000 new jobs added each month in 2018; now he predicts it will be 220,000 per month. He also now predicts that government spending will grow by 3.3 percent with the new budget deal; his November prediction was .7 percent.
With the predictions, Witte said there are risks that could change them — inflation, higher interest rates that are being seen this year, and the federal budget deficit, which he estimates will hit $1.15 trillion by the end of this year.
Deregulation and tax cuts significantly affected the market, said Charles Trzcinka, finance professor at the Indiana University’s Kelley School of Business.
The area to watch in the market is the earnings, he said. At the end of 2017, revenue growth was up 6.3; the earning growth was 10.9 percent, which Witte said is good.
Revenue growth for 2018 is expected to be about 6.6 percent; the best industry for growth will be energy, at 13.9 percent, and the worst sector will be utilities, at 2.3 percent.
For 2018, earnings are predicted to grow by 17.9 percent, with the energy sector’s growth at 70 percent. “That’s huge,” Trzcinka said, “and that’s clearly due to the deregulation in that sector.”
He predicts the stock market will be average overall.
Manufacturing remains Indiana’s largest industry contributing to the state’s gross domestic product, said Jerry Conover, director of the Indiana Business Research Center, located at Indiana University’s Kelley School of Business
The state’s share of manufacturing output has grown over the last 10 years, from 3.9 to 4.5 percent.
“That’s encouraging, especially in a place like Jasper where manufacturing is an important local sector,” Conover said. Agriculture, forestry, fishing and the hunting sector have also grown, he said.
Ever since the recession ended seven years ago, the state has seen steady job growth, he said. Areas seeing the biggest job growth include transportation and warehouse, professional and scientific occupations, administrative, waste management, education services, health care and food services.
And the unemployment rate in December was 3.4 percent, which is encouraging, Conover said. “That suggests that most everybody who is seriously looking for a job is finding one,” he added.
Personal income over the last 10 years grew faster than it did nationally, Conover said. But the difference between the average Hoosier income per capita and national figure, he said, is that “we make $6,149 less than the average American. So I guess it helps to be an affordable place to live.”
In a nutshell, he called it “respectable growth for Indiana.”
The local economy is doing great, said Ed Cole, president of Dubois Strong.
With the county’s unemployment rate at 2.2 percent in December, he said “we still have more jobs than people.”
With that, he said efforts must be made to bring more people to the county.
He then talked about the activities Dubois Strong is involved in. Those efforts include the pursuit of the Midstate Corridor to better connect the county with I-69, the agency’s effort to reach potential employees with the second year of ad marketing via Facebook, and the increased number of housing projects being constructed throughout the county. Cole also said that a new effort will be launched in April to focus more on quality of life to entice potential employees to come to Dubois County.
“The old economic model was that talent follows businesses,” Cole said. “Now we must follow a new economic model: Businesses follow talent.”