Indiana economy up, but still not 'robust'

The Leading Index for Indiana, while rising slightly from its revised January level, still does not reflect a robust picture of the state’s economy to start off the year. That’s the bottom line, according to IU Business Research Center economist Tim Slaper, who put together and analyzes the index.

The index is designed to reflect the structure of the Indiana economy, according to the research center, and is a predictive tool that signals changes in the direction of the economy several months before the change arrives.

In his analysis released Friday, Slaper pointed to several positive signs, but noted: “That said, consumers are facing some new financial pressures. … The payroll tax holiday is over, returning to its 2010 level of 6.2 percent from 4.2 percent. An American who earns $50,000 is now taking home about $83 a month less. Meanwhile, trips to the gas station are also becoming more expensive, leaving consumers fewer dollars for discretionary spending.”

One group who stayed somewhat upbeat as last year ended were CEOs, according to Slaper in the new release, citing increasing optimism in the fourth quarter of 2012. But, he added, “CEO sentiment remains pessimistic by historical standards.”

While corporate profits are at record levels as a share of GDP, small businesses are still struggling and small-business-owner confidence lags, according to the National Federation of Independent Business’s Small Business Optimism Index. That index gained 0.9 points last month but failed to regain the losses caused by the fiscal cliff scare.

But there also were some positives even in the face of disruption from Superstorm Sandy and the uncertainty surrounding the impending fiscal cliff, he noted, and each of the components of private domestic demand exceeded Center for Econometric Model Research estimates.

“Thus, while the top-line GDP numbers for the next couple of quarters may be unsettling, the recovery remains well established,” he said.

“Even though the current slow growth forecast may seem pessimistic in the short run, the private-sector outlook has improved over the past three months. After the third quarter of 2012, the underlying strength in the private sector becomes more apparent, and growth is expected to rise toward 3 percent.”

Other good signs include a solid January for car sales and a growth in new industrial orders and purchasing by businesses. Transportation and logistic activities measures also were up for the fourth consecutive month.

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