Strong Local Economy Expected To Continue
July 28, 2016 at 4:25 p.m.
Warsaw and Kosciusko County have experienced eight years of good economic times.
And the economists of Indiana University at South Bend's Bureau of Business and Economic Research don't see that changing any time in the near future.
That was the outlook Drs. Wayne Bartholomew, Fred Herschede and Paul Joray gave area financiers and businessmen at this morning's fall economic briefing, sponsored by Lake City Bank.
"We are in the 102nd month of expansion," Herschede said. "The longest peacetime expansion of this century."
He attributed that growth to several factors - low inflation, high consumer demand, and low interest rates.
"The strength of consumer demand, especially for durable goods and housing, combined with strong business investment are all signs we will continue to see the economy expand," he said. "The weakness in exports is the only cloud, but that should correct itself as Asia rebounds from its stagnant economies."
Herschede added that personal spending has been strong, outpacing increases in income. He said this was due to the strong showing of the stock market, with investors realizing substantial gains.
"Household wealth is driving the consumption," he said.
The stock market, while being the engine behind the strength of the economy, also poses the largest risk to it, as well, Herschede said.
"If we see the stock market's bubble burst, that will have a major impact on the national and local economies," he said.
He said the market, by some estimates, is overvalued by as much as 30 percent.
Other risks to the economy include the possibility of the Federal Reserve becoming too aggressive in keeping inflation from flaring up and that consumer spending becomes more unrestrained.
From the standpoint of jobs, Bartholomew sees the labor market in northern Indiana to continue to be tight, with a 2.4 percent unemployment rate statewide being well below the 4.2 percent national average.
"The most important factor in determining job growth is growth in the Gross Domestic Product, which has been in the 4 percent range on an annual basis," he said. "The second most important factor is labor productivity, and that has been growing at 1.6 percent per year."
Bartholomew forecasts employment costs to edge up a modest 3.6 percent over the next four quarters, with the labor force increasing 1.6 percent over the same time frame.
Joray said the industries most influential to the area economy will see a softening over the next year, with housing construction and manufactured housing sectors being impacted by an increase in mortgage rates.
"Even with the rise in interest rates and a drop in consumer confidence, growth will still occur," he said.
The market for recreational vehicles and automobiles will remain stronger, but the growth in sales will slow as the year progresses, Joray predicted. [[In-content Ad]]
Warsaw and Kosciusko County have experienced eight years of good economic times.
And the economists of Indiana University at South Bend's Bureau of Business and Economic Research don't see that changing any time in the near future.
That was the outlook Drs. Wayne Bartholomew, Fred Herschede and Paul Joray gave area financiers and businessmen at this morning's fall economic briefing, sponsored by Lake City Bank.
"We are in the 102nd month of expansion," Herschede said. "The longest peacetime expansion of this century."
He attributed that growth to several factors - low inflation, high consumer demand, and low interest rates.
"The strength of consumer demand, especially for durable goods and housing, combined with strong business investment are all signs we will continue to see the economy expand," he said. "The weakness in exports is the only cloud, but that should correct itself as Asia rebounds from its stagnant economies."
Herschede added that personal spending has been strong, outpacing increases in income. He said this was due to the strong showing of the stock market, with investors realizing substantial gains.
"Household wealth is driving the consumption," he said.
The stock market, while being the engine behind the strength of the economy, also poses the largest risk to it, as well, Herschede said.
"If we see the stock market's bubble burst, that will have a major impact on the national and local economies," he said.
He said the market, by some estimates, is overvalued by as much as 30 percent.
Other risks to the economy include the possibility of the Federal Reserve becoming too aggressive in keeping inflation from flaring up and that consumer spending becomes more unrestrained.
From the standpoint of jobs, Bartholomew sees the labor market in northern Indiana to continue to be tight, with a 2.4 percent unemployment rate statewide being well below the 4.2 percent national average.
"The most important factor in determining job growth is growth in the Gross Domestic Product, which has been in the 4 percent range on an annual basis," he said. "The second most important factor is labor productivity, and that has been growing at 1.6 percent per year."
Bartholomew forecasts employment costs to edge up a modest 3.6 percent over the next four quarters, with the labor force increasing 1.6 percent over the same time frame.
Joray said the industries most influential to the area economy will see a softening over the next year, with housing construction and manufactured housing sectors being impacted by an increase in mortgage rates.
"Even with the rise in interest rates and a drop in consumer confidence, growth will still occur," he said.
The market for recreational vehicles and automobiles will remain stronger, but the growth in sales will slow as the year progresses, Joray predicted. [[In-content Ad]]