The Times Board of Economists

Economy improving slowly, but shutdown dragged on growth

2013-10-19T22:30:00Z 2013-10-21T13:47:03Z Economy improving slowly, but shutdown dragged on growthJoseph S. Pete joseph.pete@nwi.com, (219) 933-3316 nwitimes.com
October 19, 2013 10:30 pm  • 

MERRILLVILLE | Northwest Indiana business leaders said the economy continues to plod along a path of gradual improvement, but they raised concerns about the impact the government shutdown has had and expressed worries with the uncertainty surrounding the sweeping health care overhaul.

Members of The Times Board of Economists reported at their October meeting the area economy keeps moving slowly forward and should see a boost because of holiday spending.

The 16-day federal government shutdown might have dampened economic growth that was modest already, said Micah Pollak, Indiana University Northwest assistant professor of economics.

Economists believe the shutdown shaved as much as 0.6 percentage points off the nation's gross domestic product, which was estimated to grow between 2.2 or 2.4 percent for the year, Pollak said. The shutdown is estimated to have cost as much as $300 million per day, or $12.5 million per hour.

"Businesses and private companies rely on government services in some way or another, whether it's agricultural crop reporting or education," Pollak said.

Even before the shutdown, Northwest Indiana was still struggling to get back to the full level of employment it had prior to the downturn. The region had about 290,000 jobs before the recession, but remains about 16,000 jobs short of the 2007 level, Pollak said.

Pollak is one of about two dozen members of The Times Board of Economists, a panel of local business leaders who represent various industries that include manufacturing, agriculture, construction, entertainment and banking.

On a scale with one being the lowest rating and 10 being the best rating, the board rated the economy's health at 6.3 for the region and 6.5 nationally. Their estimation of the local economy dipped slightly from July's survey response of 6.4, but the view of the national economy rose from 6.4 percent.

Board members are more optimistic about the next quarter. Their outlooks are slightly more positive about the next three months than they were in July, but a little less positive about the next year.

Representatives of a few sectors said they expected their industries to add employees over the next six months. Retail, fuel, construction, media and nonprofits all expected to hire.

Overall, the Board of Economists' average outlooks for their sectors and the overall economy still remained among the highest they have been since 2007.

Car sales had hit record highs since 2007 in July and August, but the government shutdown cast a chill on consumer confidence, said Tim Roper, owner of Smith Motors Auto Group. Showroom floor and online traffic both fell off by 30 percent during the stalemate in Washington.

"Generally, every time you have uncertainty, it affects consumer confidence and sales," he said. "Hopefully, with the settlement, now we can get back to where we were."

Housing inventory built up to a 22-month supply during the downturn, but it has plunged to a six- or seven-month supply because of strong home sales, said Bill McCabe, Century 21 Executive Realty broker/owner.

Other sectors also have seen improvements.

"Both nationally and locally, businesses cut back on advertising spending in recent years," said Jennifer Finnerty, general sales manager for Radio One Communications in Valparaiso. "But they've started to increase their spending. We've seen retail regain their confidence. Automotive has done well. There's a real feeling that things are improving."

Advertising is a bellwether industry because it is one of the first expenses many business owners cut when less revenue comes through the door, Finnerty said.

"Advertising's performance shows the economy is pacing well in October," he said. "But anything can change."

Unemployment numbers have been improving, and Europe has been slowly coming out of its mini-recession, said Roy Berlin, president of Berlin Metals. Manufacturers, and especially the steel industry, have been enjoying a better climate overall, he said.

Car and oil tube sales for instance have been on the upswing, causing demand to spike.

"I think the numbers bode well generally," he said last week. "We could possibly see a better economy, though not boom times, next year. But there's still the jerks in Washington who can't reach any compromise. Barring any exogenous changes, we should still see economic conditions generally improve bit by bit."

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