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Outlook Bleak For Indiana's Economy

Last updated on Monday, July 23, 2012

(BLOOMINGTON) - Indiana’s leading economic indicators have remained unchanged for two consecutive months, but that’s not the bad news in the latest monthly report from the Indiana Business Research Center at Indiana University’s Kelley School of Business.

The bad news is that all the data point to the state's economy getting worse before it gets better.

Ron Spaw of the Herald Times reports that Tim Slaper, director of economic analysis for the research center, said positive growth in the housing market in June was negated by weakness in the manufacturing sector.

Except for housing, which is showing signs of recovery, he said all the economic data of the past month points downward.

"What it's saying is that the more robust economic activity that we experienced at the first of the year has petered out," Slaper said.

The center's Leading Index for Indiana is designed to indicate the direction of the state's economy for the next five to six months, and Slaper said the June report indicates the economy likely will slow in the next two quarters.

Combined with poor economic news elsewhere -- the continuing crisis in Europe, a downturn in China's economy, the so-called "fiscal cliff" facing U.S. policymakers and eroding consumer and business confidence -- Slaper said it is conceivable that the U.S. experience a "double dip" recession early next year.

"The economic winds are not blowing in the right direction," he said.

The index does not have an agricultural component, but Slaper said widespread crop failure as a result of this summer's drought would be a serious blow to the state's economy, affecting not only farm incomes but also food and energy costs for all Hoosiers.

Slaper said the state also shouldn't count on posting another record for exports as it did in 2011, when more than $32 billion worth of Indiana products left the state.
"Knowing things are cooling off in Europe, Indiana shouldn't expect robust growth in exports next year," he said.

Automotive products were the state's leading export in 2011, and Slaper said the automotive sector of Indiana's economy still is doing "a little bit better than average."
However, Slaper said, a component of the index that the tracks the activity of industrial purchasing managers indicates that companies are not buying as much raw material for the products they make, which could be another bad sign for the state's economy.

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