Ball State Economists Predict Better 2006

MUNCIE -- A couple of Ball State University economists -- and the decade-old BSU Business Forecasting Roundtable that the academics launched -- are leery about the continuing trade deficit, low savings among Americans, the much-anticipated home-building bust, and costs to rebuild after this year's natural disasters.

Despite those concerns, Pat Barkey, Gary Santoni and roundtable members Tuesday predicted economic growth for the state and the nation in 2006, based on momentum from 2005.

Manufacturing output has rebounded nationwide in the past two years from post-recession lows posted during the first three years of the new century, according to Barkey, director of economic and policy studies at BSU's Miller College of Business.

Indiana has suffered as much as any state, but it and Kentucky have scrambled back to match employment levels from five years ago -- something Midwest neighbors Illinois, Ohio and Michigan have failed to achieve.

"Prospects look good, and the forecast for our business calls for another good year," said Ken Briner, senior vice president at Muncie Power Products, after the economists' presentation. "Manufacturing in the state may be shrinking, but it is not going away."

Santoni, a professor of economics before last year's retirement, predicted the nation's gross domestic product would grow by about 3.8 percent for 2005, compared to a 3.4-percent growth rate over the past 45 years.

For 2006, the roundtable predicted 3.6-percent growth in GDP.

The group expected inflation to run about 3 percent, same as this year -- compared to a 45-year average of 3.8 percent.

And roundtable members expected 5.2-percent unemployment, near 2005 levels of 5.1 percent -- both below the 45-year average of 5.9 percent.

However, yields on 10-year Treasury bonds will average near 4.3 percent in 2005, and the forecasters predicted 4.6 percent for 2005 -- both way below a 45-year average of 7.1 percent.

Unlike Indiana, the nation has had four straight years of continuous economic growth -- but the state is catching up.

"Since the low point of mid-2003, manufacturing employment statewide has stabilized and even managed to grow a bit," Barkey said. But he expects the nation's industrial boom to slacken in 2006, and that is his top concern.

Neither Santoni nor Barkey are overly concerned about the country's negative balance of trade -- as long as foreign countries continue to invest in the U.S. economy. Santoni noted that the worth of the U.S. dollar is increasing worldwide.

Energy prices inflated by hurricane damage have affected his business, said roundtable chairman John Littler, an owner of Littler Diecast. And members of the North American Diecast Association have plummeted from 800 to 520 in the past decade. But Littler, too, is expecting a good year after experiencing a good year in 2005.