Phil Powell, executive director of the Indiana Business Research Center and clinical associate professor of business economics and public policy at the Kelley School of Business at IU Bloomington, talks about the State of Indiana’s economic outlook during the annual Economic Outlook Panel at The Commons in Columbus,, Wednesday, Nov. 13, 2024. Staff photo by Mike Wolanin | The Republic
Phil Powell, executive director of the Indiana Business Research Center and clinical associate professor of business economics and public policy at the Kelley School of Business at IU Bloomington, talks about the State of Indiana’s economic outlook during the annual Economic Outlook Panel at The Commons in Columbus,, Wednesday, Nov. 13, 2024. Staff photo by Mike Wolanin | The Republic
Financial and economic experts from Indiana University – Bloomington and IU Columbus are predicting middle-of-the-road economic conditions in 2025 for the state, nation and internationally.

Optimism on the panel isn’t quite as high compared to the past few years, but panelists said economic fundamentals remain strong. However, several said that wider geopolitical considerations could dampen the reality of the projections.

That’s what four academics said during the annual “Futurecast” Business Outlook Panel, hosted by the Division of Business at IU Columbus, the Columbus Area Chamber of Commerce, the Kelley School and the Indiana Business Research Center.

The presentation at the Commons was one several Futurecast panels taking place across the state. All proceeds from the local event will help fund scholarships for IU Columbus business students.

Four panelists gave sometimes slightly differing predictions for what’s to come, focusing on outlooks for the U.S. and global economies, financial markets, the state and the greater Bartholomew County area.

U.S. and international outlook

The forecast for the United States and world at-large was provided by Jennifer Rice, a senior lecturer of business economics and public policy in IU’s Kelley School of Business.

The forecast for 2024 was optimistic, according to Rice, but predictions could have been more optimistic. Real GDP grew 2.7%, nearly a point higher than the projected 2%.

Rice said 203,000 jobs were added per month in the U.S. this past year, with unemployment averaging 4.1%. Rice said the unemployment rate was “still very low by historical standards, and lower than our expectations.”

A reason for the better-than-expected economic conditions is because of a strong labor market that helped “fortify the consumer and increase personal consumption.”

“But as you sit there as a business owner, a community leader, or even a family household living here— you might be asking yourself: ‘Why don’t I feel like the economy is doing better’”

Part of that explanation is due to several years of inflation “specifically above preferred inflation rates that have accumulated over time,” she said.

Moving forward to 2025, Rice said an above-average trend of 2.8% GDP growth for quarter three, combined with “mostly positive signs in most of the recent inflation rates,” indicates positive things for the economy in 2025.

Forecasted growth is moderate and less than what has happened in the past year, with slight weakness projected in the labor market.

Real GDP is expected to grow at 2.1% and inflationary pressures are expected to continue to slow down, with core inflation nearing 2.3% in 2025, according to the forecast.

Employment growth in the U.S. is expected at about 130,000 a month, fewer than the 203,000 jobs per month in 2024, she said. The unemployment rate is forecast to experience a modest uptick near 4.6%, with increases expected primarily during the first half of the year.

“We see a fairly middle-of-the-road economy coming into 2025,” Rice said. “We see that GDP is going to grow, not as large as it did this year, but it’s going to be increasing and growing around trend.”

Rice couched the forecast due to potential externalities, like geopolitical issues and policy changes on the federal level, particularly those related to tariffs.

“We expect one of the big contributors that could potentially risk our forecast is geopolitical issues around of the world,” Rice said. “… The other one is trade policies, specifically talking about tariffs. If there’s a decision to increase tariffs beyond what they currently are, that could possibly lead to inflationary pressures that we may see (causing) inflation to increase at a higher rate than what we expect.”

Internationally, global output is expected to grow at 3.2% in 2025, according to the forecast. Inflationary pressures are projected at 4.3% in 2025, but are expected to ease.

However, slowing of inflation could be upended with the continuing potential for an escalation of the war in the Middle East, Rice said.

Financial markets outlook

Russell Rhoads, a clinical associate professor of financial management at IU’s Kelley School of Business said he wasn’t quite as optimistic as Rice.

Rhoads said it will be difficult to replicate the economic performance of the past two years, in part because the market “has been extremely rate driven.”

He noted his outlook was done prior to the election, when “revenue markets were actually expecting the Fed-funds rate to bottom around 3.5%, and that was expected to happen in December of 2025. Since then, that number is closer to 4%, at about 3.9% for December of 2025.”

“If the fed is going to be cutting rates for two years, we’re going to be in a very sluggish economic environment,” according to Rhoads.

Because stocks performed much better than expected in 2023 and 2024, valuations are relatively high, meaning a repeat of outperforming historical averages is unlikely. The expectation is, at best, that stocks will under perform with some possibility of negative returns next year, per Rhoads.

Rhoads observed that there are concerns among economists that some of President-elect Donald Trump’s polices “might be inflationary,” although he noted he felt either candidate “would create inflation risks for different reasons.”

He pointed towards potential reduction in regulations and another round of tax cuts as federal policy changes that could spur some growth for financial markets.

Geopolitical concerns in Southeast Asia came up, with Rhoads predicting that China is in store for major economic problems, which could affect markets.

“Their housing crisis is going to make 2008 look like flag football,” Rhoads said.

State of Indiana outlook

The state of Indiana is projecting to do better than the nation in 2025, according to Phil Powell, executive director of the Indiana Business Research Center and clinical associate professor of business economics and public policy at Kelley.

The fundamentals of the state economy are strong, but the “big monster we’re trying to shoo away is inflation,” Powell said.

“Our forecasted growth for the U.S. economy is about 2.1%, we’re forecasting in 2025 that our state will go 2.9%— almost a point higher,” Powell said.

Income growth is projected to be steady and employment growth slowing, with a loosening of the labor market, Powell said.

“One of the reasons that Indiana is going to grow faster than the rest of the nation is because of our dependence upon manufacturing,” per Powell.

A manufacturing renaissance started before COVID, Powell said, and a lot of manufacturing that used to be overseas is coming back. That will be sped up due to policies of the incoming Trump administration, Powell said.

He also observed that we are in the midst of an “era of de-globalization” and added that a drift “towards protectionism” could have a negative impact.

Powell said this drift is not inherently reserved to one side of the aisle: “President Biden did not rescind the tariffs that President Trump put in,” referring to tariffs on China originally imposed during Trump’s first term, and increased during the Biden administration.

“Most American manufacturers, they make stuff here but they import a lot of inputs into the stuff they make overseas,” Powell said. “And if overnight, you see a 30% increase in tariffs across the board, that’s a 30% increase in manufacturing costs.”

Powell was referring to President-elect Trump’s previously discussed plans for a blanket tariff of 10% to 20% on all imports, with additional tariffs of 60% or higher on Chinese goods.

Powell also mentioned potential restrictions on immigration that would make “inputs more expensive.”

Hoosier productivity has grown faster than the U.S. since 2017 due to various workforce policies, and greater flexibility in high school diplomas that put more of an emphasis on trades, according to Powell.

A worry at the state level, Powell said, is what is predicted to be a tight budget session at the statehouse, in part due to an overrun on the state’s Medicaid budget last year.

“Our new governor’s not going to have the extra spending money that perhaps Governor Holcomb did, but hopefully the innovation continues again.”

Local outlook

Economic data for the City of Columbus has been something like a roller coaster in the past two decades, but a soft-landing is projected next year, according to Steven Mohler, an assistant professor of management at IU Columbus.

In the past 21 years, the city’s GDP has increased 14 times and decreased seven times, whereas the state has increased or decreased four times and the U.S. government has twice.

Columbus’ GDP increased 4.1% in 2021, followed by a 7% increase in 2022, which is the most recent data available.

That rebound is due to a sizeable 13% increase in manufacturing activity, Mohler said.

Unemployment reached 17.4% in April of 2020 during COVID, but returned to around 2% by December 2021. That figure has climbed since then, reaching 3.4% or higher during eight of the first nine months of 2024.

New vehicles purchases are projected to increase during 2025 with Cummins Inc. sales slightly increasing as well “due to actions taken by the Cummins leadership team.”

The expansion of Toyota Material Handling and the construction of the Kings Hawaiian and Grillo’s Pickles manufacturing facilities will mean even more jobs by 2027. In addition, Ninth Avenue Foods is poised to add about 100 jobs, Mohler said.

Local GDP growth could be hindered by a lack of available workers and the large amount of workers that are commuting to and from Columbus for work. In turn, Columbus is forecast to experience flat to slightly-higher real GDP growth between 0 and 2%, according to Mohler.

“Weakness in the automotive and durable goods sections, fueled by continuing high interest rates and low consumer confidence, may be a key in 2025.”

Unemployment may increase slightly due to “a potential slack in the manufacturing sector” and the number of employed is expected to decrease by less than 300 in 2025.

“Our local forecast sounds like a soft-landing scenario, but only time will tell,” Mohler said.
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