IU economists: Subpar growth expected in '13

2012-11-09T17:00:00Z 2012-11-18T21:20:57Z IU economists: Subpar growth expected in '13Bowdeya Tweh bowdeya.tweh@nwi.com, (219) 933-3316 nwitimes.com
November 09, 2012 5:00 pm  • 

SCHERERVILLE | The U.S. economy is expected to grow below its potential again in 2013, but that's only if it doesn't take a swan dive off the fiscal cliff, economists from Indiana University and Purdue University said Friday.

Without action from Congress and the president, Ellie Mafi-Kreft, IU clinical assistant professor of business economics and public policy, said the combination of tax hikes and automatic federal spending reductions could send the nation into a recession in the first half of the year. That outcome would jeopardize the IU Kelley School of Business' forecast that the U.S. economy grow at an annual rate of 2.5 percent in 2013.

The commentary was part of an annual presentation describing the outlook on regional, state, national and international economic conditions. The Lake County Advancement Committee and Calumet College of St. Joseph were local hosts for the event.

"There are a few uncertainties that (cast) a shadow on our 2013 forecast," Mafi-Kreft said to more than 150 people at Teibel's Restaurant.

Several European countries will remain a drag on global growth next year as donor and debtor nations struggle to figure out how to maintain stability in the eurozone, Mafi-Kreft said.

Countries with emerging economies will continue to account for the majority of growth around the globe next year, Mafi-Kreft said. Global economic growth is expected to be 3.6 percent in 2013, which is expected to be slightly higher from a year ago.

Indiana University finance professor Charles Trzcinka said U.S. equity markets should see "below average" growth in 2013 based on improvements in critical sectors such as housing. Short-term interest rates and inflation also are expected to remain at levels that will be beneficial for business investments. 

But he said many businesses may remain hesitant to spend capital reserves because of worries about continuing changes in the regulatory environment.

"Markets don't like uncertainty and businesses don't like uncertainty, especially out of government," Trzcinka said.

Long term, Mafi-Kreft said one of the biggest drags on U.S. economic growth will be the country's debt load. The nation had more than $16.2 trillion in public debt outstanding as of Thursday, according to a U.S. Treasury Department website.

Indiana employers are expected to add 50,000 jobs to their payrolls next year, said Tim Slaper, director of economic analysis for the Indiana Business Research Center at IU. Slaper said unemployment rates in the nation and Indiana are expected to fall in 2013 to near 7 percent. Personal incomes for Hoosiers should rise at a rate of nearly 2 percent in 2013.

Food price inflation is expected to be at an "above normal" level in 2013 as a result of the impact of the Midwest drought on farmers and livestock producers earlier ths year, said Corinne Alexander, associate professor in Purdue University's agricultural economics department.

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