Indiana's Outlook for 2009

Indiana's Outlook for 2009
Jerry N. Conover, Ph.D.
Director, Indiana Business Research Center, Kelley School of Business, Indiana University

November 2008, updated December 2008

Indiana is not immune to the forces shaping the national and global economies, so its outlook for the year ahead is similarly cloudy. At the same time, certain aspects of Indiana's economy cause the Hoosier State to perform in idiosyncratic ways. This article briefly overviews several dimensions of our state's recent performance and its outlook for 2009.

Overall Economic Output
The broadest measure of our economic activity is gross domestic product (GDP) at the state level. Indiana's GDP grew very slightly (0.3 percent) in 2007 following two years of small declines. Although these three relatively flat years followed several years of 2 percent to 4 percent annual increases, the rest of the nation has seen stronger GDP growth; since 2000, only Ohio and Michigan have had slower GDP growth than Indiana.

Indiana's manufacturing output has decreased over the past three years, but manufacturing's share (28 percent) of Indiana GDP is still the largest of any sector; only one state (Oregon) is more reliant on manufacturing. Indiana sectors with GDP that has grown in recent years include retail; transportation and warehousing; arts and entertainment; health care; technical services; and administrative and support services.

The outlook for 2009 calls for limited growth in GDP, given the weak national and global economies on which so many Indiana firms depend, coupled with weakness in the consumer sector and the automotive industry. There is some potential for further downward momentum (depending in part on the speed and effectiveness of federal stimulus actions), although late in the year we may see some GDP growth return....

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