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Release Date: November 8, 2013

Brewer provides 2014 local economic forecast during IU panel discussion

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Susan Sullivan
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During the Indiana University Economic Outlook Breakfast in the Columbus Learning Center at Indiana University-Purdue University Columbus yesterday, IUPUC Professor Ryan M. Brewer told attendees that despite global economic and national political risks, the greater Columbus area can expect modest, slow growth in 2014.

According to Dr. Brewer, the Columbus economy rides on a function of three inputs:

  1. Internal resource capabilities and value propositions
  2. Reliance on global demand for its products and services
  3. Hope that politics and federal reserve actions do not hamper private sector growth

Brewer reported leading indicators including Columbus housing permits, home sales, and home prices have trended upward since 2008 as new jobs were added, creating demand in an era of historically low mortgage rates. The growth in the city’s gross domestic product (GDP) rate exceeds that of both Indiana and the nation, he also added.

“Over the past 12 months, a number of Columbus firms have announced the launch of new products and services, new business ventures, record sales, and plans for expansion. The total equity returns of these enterprises have performed very well, with companies including Cummins, Sunright America, Toyota, and LHP reporting banner years in terms of revenue,” Brewer said, adding continued expansion projects from these and other firms are expected.

With the city’s investment of nearly $150 million into its downtown infrastructure in addition to the Bartholomew County School Corporation’s $125 million investment in secondary schools over the past five years, as well as plans for an additional $25 million over the coming two years, Brewer said the city’s ability to attract talented professionals to meet local workforce needs will continue to be strong.

The global marketplace continues to exhibit generally slow, variable, and uncertain growth, Brewer finds. “Expansion into China, India, and other emerging markets is an important factor for local businesses to achieve robust sales growth. Uncertainties about tax policies, the national debt, and U.S. Federal Reserve policies are a concern to decision-makers in supply chains impacting Columbus firms. These uncertainties cause a chilling effect on long-term capital investments and hiring decisions.”

Before Brewer’s forecast, Dr. Frank Wadsworth, head of the Division of Business at IUPUC, led participants in an interactive Columbus consumer confidence index (or CCI) in which participants texted their responses to a series of six questions about the local economy. According to Wadsworth, economists consider CCI numbers over 100 to be positive; those under 100 are considered negative.

Although a rudimentary analysis based on a random sample of individuals who may not be representative of Columbus as a whole, the CCI measured during the event was 154.6, which Brewer said is a strong vote of confidence among local residents that Columbus’ economy will continue to be strong in 2014.

“In comparison, last month’s national CCI measured just 71.2, a drop from 80.2 in September. Factors including the government shutdown, congressional gridlock, and continued concern about the national debt ceiling can likely be attributed to the decrease in consumer confidence in other parts of the state and nation,” Brewer said.

He concluded by saying that a continued focus on local development, a cooperative synergy among municipal and business leaders, and continued emphasis on intangible assets including a well-educated populace that values productivity, teamwork, and a spirit of volunteerism will all facilitate moderate growth in greater Columbus in the new year.

In addition to Brewer’s local forecast, other financial experts offered state, national, and global outlooks for 2014.

  • Dr. Theresa Williams, director of IU’s Center for Education & Research in Retailing, provided a state forecast. Williams expects an increase in job growth to about 55,000 new jobs for the Hoosier state in 2014, compared to just 37,000 by the end of 2013. She forecasts unemployment to close at 6.8 percent in 2014, down from 8.1 percent in 2013. “Full” employment, according to Williams, should be reached in 2016 with a 5.5 percent overall unemployment rate.
     
  • Dr. Charles A. Trzcinka, chair of finance for the Kelley School of Business at IU, reported on the nation’s financial future, noting the U.S. economy should achieve a modest 1.7 percent total growth by the end of 2013. During the first half of 2014, Trzcinka forecasts the same growth rate, but said if Congress can resolve federal budget and debt ceiling issues, overall growth could reach three percent by the end of 2014.
    He noted the stock market is strong and has recovered from the recession better than employment and personal wages.
     
  • The global outlook was delivered by Dr. Ellie Mafi-Kreft, an assistant professor of economics and public policy at IU. She predicts the global economy to strengthen in 2014, with GDP expected to rise by nearly four percent, up from 2.9 percent in 2013. Mafi-Kreft reported the economies in Canada and Japan will strengthen, while those in India, Turkey, and Brazil will be less robust. China’s economy is growing moderately. World trade is expected to remain tepid, below the 20-year average of just over five percent. The global economy could face additional risks in the second half of 2014, she said, depending largely on actions taken by the U.S. Federal Reserve as it reduces its monetary stimulus.

For more information about local, regional, and other financial forecasts for 2014, contact Dr. Ryan Brewer at rybrewer@iupuc.edu or call 812.348.7253.