Slow growth predicted in U.S. economy in 2020

Nov 27, 2019

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The economy will continue to grow in 2020, but at a much slower pace than in recent years.
That was the prediction shared by the Kelley School of Business Economic Outlook Panel Wednesday (November 20) at Indiana University Kokomo.
“For the last 10 years, we’ve been on cruise control, at a nice moderate pace,” said Alan Krabbenhoft, dean of the School of Business in presenting the local outlook. “Right now, we’ve hit a construction zone, we’re at 30 miles an hour. With the transition from growing quickly to now, it almost feels like we’ll never get there.
“With 1.2 percent growth, we’re going to be like the kids in the back seat, asking ‘When are we going to be there?’ It’s going to be a while.”
In addition to Krabbenhoft, the panel included Kelley School of Business faculty Catherine Bonser-Neal, associate professor of finance; Mark Frohlich, associate professor of operations management; and Ellie Mafi-Kreft, clinical associate professor of business economics and public policy.
About 120 government officials, business professionals, and students from the Kokomo CEO program attended the annual event. 
The U.S. economy is expected to expand for a 12th consecutive year, but only by about 2 percent, and struggling to remain at that level by the end of 2020. The state’s economy will be more anemic, growing at a rate of about 1.25 percent.
Over the past year, political dysfunction and international trade friction have disrupted supply chains and eroded both consumer and business confidence. U.S. employment grew in 2019, but will slow throughout 2020. 
Krabbenhoft noted that IU Kokomo’s regional economy is heavily based in manufacturing and agriculture, and diversification is important.
While farmers had ideal weather conditions in last year, 2019 presented “the perfect storm,” with a cold, extended winter, followed by a rainy spring and drought conditions in summer. That produced a 14.2 percent drop in corn yield, and 16.5 percent in soybean yield. Positive market prices for corn partially offset crop production losses, but falling prices in soybeans compounded with trade disputes with China, a major importer of soybeans, created difficulties.
“China continues to target those states and regions where potentially lost votes would be the most detrimental to President Trump and the Republican party,” he said. “We represent one of their best opportunities to inflict pain on the president.”
Krabbenhoft said the unemployment rate in Howard County generally was in line with state and national numbers, other than a few spikes in unemployment that were related to short-term closures  or slowdowns at the local automobile plants, which coincided with data collection periods. For 2020, “nothing in terms of economic conditions would suggest there would be a steady increase. At the same time, it has been pointed out for the last two years that long-term declines in the unemployment rate would be unlikely, as the economy has already been operating at our possibly even below full employment for some time.”
Other highlights from the forecast included:
  • Inflation will rise from 2019 and will end 2020 close to the Federal Reserve’s 2 percent target.
  • Energy prices will be relatively stable, with average prices similar to 2019.
  • For business investment, 2020 will be another year of weak growth. The U.S. housing sector, however, will be better than the disappointing 2019. Consumer spending — which has been strong in 2019 — will decelerate, but will still remain the primary support for the expansion.
  • Unemployment rates across the state will continue to stay at or below full employment through 2020.
  • Expectation that U.S. vehicle sales will experience a drop of around 2 percent will affect the Indiana economy next year causing overall economic output in the state to lag that of the nation.
Community First Bank of Indiana was presenting sponsor. Platinum sponsors were the City of Kokomo and Smith Financial. Gold sponsor was Kokomo Grain. 
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