Morton J. Marcus is an economist formerly with the Kelley School of Business at Indiana University. His column appears in Indiana newspapers.
If you Googled Indiana’s economy recently, you found our Governor, Lt. Governor, and State Sen. Hershman (R-Buck Creek) all yahooing our employment situation. That’s good. The numbers do look good for Indiana as they do for the nation. It’s nice to see these Indiana leaders harmonizing with President Obama.
It was a particular delight to have Sen. Hershman cite the fact that Indiana led the nation’s growth in Gross Domestic Product (GDP) in the last quarter of 2015. That’s a rare distinction for us. We weren’t just ahead of the national average. Indiana was the number one state in the union with an annualized growth rate of 3.0 percent compared to a rate of 1.7 percent for the nation.
What makes this special is twofold: First, this seems like the only time I recall a leading Hoosier politician paying attention to state GDP figures. I suppose when Indiana is number one in anything, it brings out our yahooing instincts.
Second, the last time Indiana led all states in GDP growth was the fourth quarter of 2009. Imagine the statewide celebration if we had gone as long as the Cubs or the Cleveland teams without such a stellar achievement.
How did this wonder happen? The answer will be found down on the farm. For reasons I have yet to discover, the value of agricultural output in Indiana accounted for 25 percent of our GDP growth in the 4th quarter. This was a Hoosier distinction because nationwide agriculture accounted for only 0.7 percent of GDP growth. The 4th quarter alone provided 72 percent of 2015’s growth in Indiana’s agricultural sector compared to just 3.1 percent nationally.
If our yahooing leaders knew the answers, why didn’t they tell us about them?
When we think of the 4th quarter (October, November and December) retail sales come to mind: Halloween, Thanksgiving and Christmas. Retail sales may come to mind, but they didn’t come to the cash register in 2015.
Across the U.S., retail sales were extremely weak in the 4th quarter of 2015, following what had been a relatively strong year. Hoosier retail trade was flat (up an unobservable 0.04 percent) to complement the nation’s anemic increase of 0.1 percent.
If Indiana’s economy was “booming,” as claimed by our political boosters, that sound was not coming from the actions of Hoosier consumers.
Where was our strength? What sector of the non-farm economy was allowing us to claim the quarterly GDP growth crown? It was our trusted, old friend manufacturing growing by a mere 1.1 percent, yet almost twice the national rate of 0.6 percent. The result was Hoosier manufacturing contributed 44 percent to our 4th quarter growth, while that sector was just 17 percent of the growth in U.S. GDP.
Ironic isn’t it? The two sectors that have done the most for Hoosier exports, the two sectors declared dead by many seers, are flexing the most economic muscle. Will that good fortune hold or was the 4th quarter a fluke? Stay tuned, but don’t expect film at 10 or 11 p.m.