Annual IU Forecast Predicts Growing Economy, Despite Lingering Labor Shortage, Supply Chain Troubles
(INDIANAPOLIS) – IU’s Kelley School of Business is predicting economic growth next year, despite a pandemic hangover.
IU’s Business Outlook Panel expects 4% growth, most of it in the first half of the year. Economist Kyle Anderson says the bullish forecast comes despite expectations that worker shortages and supply chain disruptions will continue for several more months. He says incomes are rising, though not as fast as they are nationally, and says that should translate into more consumer spending. And while the forecast anticipates growth of just .4% in manufacturing, Anderson anticipates a rebound in Indy’s tourism and hospitality business, which will drive economic growth overall.
Economist Jennifer Rice says while tourism and other service industries are less affected by the supply chain, manufacturers feel a pinch from not only their own labor shortages, but a shortage of truck drivers to keep the supply chain moving.
Anderson says both issues reflect pandemic aftershocks. He notes other countries are far behind the U.S. in getting people vaccinated, and China in particular is still using tight restrictions to keep the pandemic under control. That slows down the flow of products and parts coming from overseas. And Anderson says some parents are still holding off rejoining the workforce because of continuing uncertainty with schools or difficulty finding child care. Other workers who were approaching retirement age used the pandemic as a cue to move that date up.
Anderson says inflation may be another pandemic hangover, one which could pose more risk to economic growth. He says the debate over whether rising prices are temporary or a reflection of something deeper has sparked the sharpest disagreements among economists he’s ever seen. But he notes the Federal Reserve has said it would consider 2% inflation low enough to be tolerable.
