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Economic Shrinkage Coming To Indiana?

State is outperforming the shrinking national economy, but economist says to watch out for a couple things
Indiana's economy appears to be outperforming the shrinking national economy, but there are also a few signs of a state slowdown.
 
The Commerce Department released the final revision to 1st quarter GDP, showing the U.S. economy shrank by 2.9 percent between January and March.  The final rate was three-times lower than the previous estimate of a one-percent loss and well off long ago predictions of many economists.  "That much shrinkage is unheard of. That's five full percentage points off where we thought it would be," said Mike Hicks, director of the Center for Business and Economic Research at Ball State University.  
 
The chairman of President Obama's Council of Economic Advisers blames the drop on falling health care spending and lower exports.  Hicks says that's only part of the story.  "Part of it had to do with the weather - you remember how bad things were.  Maybe half-a-percentage point of GDP was due to weather.  It was at least in part due to short term effects of the (Affordable Care Act)," Hicks said, adding that preliminary data shows the contraction may have continued into April and May.
 
Indiana's economy has been faring better than the nation as a whole, both in employment and private sector job growth, for several months.  "In terms of percentage job growth, we have been in the top five or top ten states consistently for the past year.  That's why our unemployment rate is 5.7-percent."  But Hicks says everything isn't rosy, at least when it comes to numbers that can predict what will happen with the economy in the future.  "Tax revenues on personal income taxes have been lagging.  That suggests that the good numbers in employment have not translated into wage gains and tax withholdings for households that we would associate with a growing economy."
 
Indiana has also outperformed most other states in manufacturing, but Hicks says that could also lead to problems.  "We're selling automobiles and other products to people in the rest of the country who have to be employed, earning money and feeling optimistic to buy them.  If we are slipping into a recession or a near zero growth rate, it will be hard to sustain our momentum."
 
 

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