IU Kelley School publishes economic forecast
With inflation at a 40-year high and an economy that is growing at a sluggish pace, concerns about a recession are real. But it may be avoided if consumer spending continues to persist and if more workers enter the labor force, according to a forecast released today by the Indiana University Kelley School of Business.
As a result, the Kelley School forecast for 2023 uses two sets of assumptions to produce a pair of forecasts, one that is optimistic and another that is moderately pessimistic. Over the past four economic quarters, total output has grown by just 1.8%. Consumer spending, business investment, housing construction, and government purchases all were significantly weaker than the panel expected a year ago, with the latter two having negative growth. The one exception has been international trade, with both exports and imports exceeding expectations. Durable goods manufacturing accounts for 16% of Indiana’s gross domestic product. Rising interest rates and other factors also may cause a drop in the demand for products. Unemployment in the Hoosier state will rise to between 4.1 and 5.5%.
The Kelley forecast also noted the relationship between total consumption and the level of household after-tax income. In 2020 and 2021, government COVID-19 payments greatly increased income relative to consumption, producing a rise in household saving. The savings rate averaged 8.8% in 2019, rose above 20 percent early in 2021, and then receded. The economists also are concerned about the drop in the labor force participation rate — the percentage of those over age 16 who are working or actively looking for employment. Over the past year, the economy has added jobs at a rate of 440,000 a month and unemployment has fallen to 3.7%. At the same time, workers have left the labor force, leaving the national labor force participation rate below its pre-pandemic level by 1.2%.
Other key points from the forecast:
- The stock market has lost $10 trillion over the past year.
- Seventy percent of S&P 500 companies have reported earnings above what Wall Street expected. Their future earnings are expected to rise by 2.2% next year.
- Interest rates have risen and will go higher because of Federal Reserve actions.
- Short-term and medium-term interest rates will remain higher than long-term rates until inflation is reduced to target levels.
- 2023 inflation should appear lower than 2022, which is a function of year-over-year comparisons shifting with the calendar.
Evansville native donates $30 million for improved mental care for children
Evansville natives Bill and Mary Stone submitted a gift of more than $30 million to the Indiana University School of Medicine–Evansville. This will mark $50 million in donations that the Stones have gifted to Evansville causes over a 5-year period. The center will work towards the improvement of psychiatric care for children who are afflicted with bipolar disorder and will drastically improve accessibility to mental health care for children and adolescents across southwest Indiana. The center will also be home to seven professionals in child and adolescent psychiatry.
Bill Stone, the 67 year-old Evansville native, studied business and accounting at Marquette University after leaving Evansville in 1974. He worked at the globally renowned accounting firm KPMG. In 1986, Stone founded SS&C Technologies, a publicly traded financial software firm for which he is still CEO. Stone is worth more than $2 billion.
#11 IUWBB takes on #5 Tennessee tonight
The first top 25 matchup is set for the #11 Hoosiers when it takes on #5 Tennessee at 6pm tonight in Knoxville. The game will air live on ESPN2.
Notable
- Indiana is off to a 2-0 start after opening week, recording a pair of wins over Vermont and UMass Lowell at home. Senior forward Mackenzie Holmes led the way with 16.5 points over the pair of games, while adding 5.0 rebounds and 1.5 blocks per game.
- IU and Tennessee met during the pandemic season in 2020 in a game scheduled midway through the non-conference schedule due to COVID-19 cancellations. The Lady Vols traveled to Bloomington on Dec. 17, 2020. The Hoosiers fell 66-58 in the matchup, its first in the series with the SEC foe since its only other meeting in 1987 – a 91-59 win for then No. 1 Tennessee in Cincinnati, Ohio in the Communiplex Classic.
- Junior guard Chloe Moore-McNeil returns to her home state on Monday night. The Sharon, Tenn. native will play her first collegiate game in the state she grew up in, which is five hours from Knoxville. The Hoosiers also have a former Lady Vol on their staff in director of player development Briana Schomaeker, who played for them from 2008-12.
This Week in Hoosier History
1859 Mayor Samuel Maxwell and the Indianapolis City Council established the first paid fire department. It had previously been a volunteer force. The department began with a hook and ladder company and two hand engines and, in 1860, gained their first steam engine.
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