An unforeseen global pandemic derailed economic growth, not only in north central Indiana, but worldwide.
Experts from Indiana University’s Kelley School of Business Economic Outlook Panel discussed the impact of the COVID-19 pandemic, and gave their forecast for the 2021 economy, via webinar.
Alan Krabbenhoft, dean of the IU Kokomo School of Business, joined Ellie Mafi-Kreft, clinical associate professor of business economics; Catherine Bonser-Neal, associate professor of finance; Kyle Anderson, clinical assistant professor of business economics and faculty chair of Kelley's Evening MBA Program; and Kevin Snyder, president of the Speedgrip Chuck Company, Elkhart.
Idie Kesner, dean of the Kelley School of Business, moderated the panel.
Mafi-Kreft noted that in November 2019, the panel forecast a global output growth of about 3 percent for 2020.
“Then, a microscopic virus came into the picture, and instead of growth in economic activities, we are experiencing a global recession of a magnitude not seen since World War II,” she said. “By the end of 2020, the global economy will have shrunk by 4.4 percent. This pandemic, which is our biggest obstacle to recovery, is something we have never experienced in modern times. As long as the virus is circulating unchecked, growth is compromised. At any moment, it can threaten to drag the world into an even more prolonged recession.”
Mafi-Kreft said the panel is “cautiously optimistic” that its estimate of 5 percent global recovery in 2021 will be just enough to replace the 2020 global drop in output.
Krabbenhoft noted that Howard County in particular was hard-hit by the pandemic, especially in April, when Indiana took drastic measures and shut down the economy.
“While rates for the U.S. and Indiana rose to approximately 15 percent, Howard County had the unenviable position of having the highest unemployment rate in the state at 33.5 percent,” he said, adding that it wasn’t really surprising, because of the county’s heavy dependence on Fiat Chrysler Automobile (FCA). When the casting and transmission facilities closed down, about 8,000 workers were unemployed, he said.
That increase was followed by a “substantial and sustained” rise in employment, he said, noting that the county’s unemployment rate was at 7.3 percent in September. Part of the reason for the decline was that manufacturers, including FCA, were quick to adopt plans to allow workers to be physically distanced, and required masks. Those plans will help with continued recovery, he said.
“Assuming the precautions already taken by manufacturers during the early stages of the pandemic continue and are enforced, the impact of any new restrictions on this particular region may be lessened, though one could still anticipate they would deal a blow to the retail, food service, and accommodation industries.”
Krabbenhoft added that the region’s second-largest economic sector, agriculture, had positive performance, with nearly ideal conditions leading to sizeable increases in total production, including 21 percent for corn to nearly 25 percent for soybeans.
Other highlights from the forecast included:
- The U.S. economy’s restart will continue in 2021, but with substantial deceleration from that achieved in 2020;
- Output could regain its previous peak by mid-2021;
- Consumer spending is recovering well, but is tilted toward goods and away from services;
- Indiana is relatively well-positioned to outperform during the recovery period as we emerge from the COVID-19 pandemic;
- Economics expect slow or negative growth conditions during the last quarter of 2020 and the first quarter of 2021, as we face new waves of infections, but then expect strong positive growth in the second half of the year.
- They do not believe total lockdowns will be necessary, as we have more knowledge of how to combat the virus now versus at the start of the pandemic.
Detailed 2021 forecasts will be available in the Indiana Business Review in December.
Community First Bank of Indiana sponsored the presentation.
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