Indiana Economy Shows Moderate Growth - BMO Economics

Employment Picked Up in Recent Months

- Job decline moderating

- Construction employment jumps late in 2011

- Auto sector recovery prospects look bright

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Feb 14, 2012, 11:00 ET

INDIANAPOLIS, Feb. 14, 2012 /PRNewswire/ -- The Indiana economy is growing at a modest pace as State budget cuts offset some of the strength in exports, according to the State Monitor report released today by BMO Capital Markets Economics.

Employment has picked up in recent months lifting annual growth back into positive territory. Construction employment jumped 12.1 percent year-over-year in December while a partial reversal of early-2011 State government layoffs and a gradual increase in manufacturing jobs have also helped. Despite the pickup in employment, the jobless rate rose to 9.0 percent by December (from a May 2011 low of 8.2 percent) amid a jump in the labor force, but it remains below the 9.5 percent level seen at the end of 2010.

"Our commercial customers continue to express optimism and confidence in the state's economic resiliency," said Tim Massey, Regional President for M&I, a part of BMO Financial Group. "Our local expertise, sector knowledge and mid-market focus are real advantages to helping our customers find solutions as they invest and upgrade their businesses."

While existing home sales have picked up in the past year, they remain down 40 percent from pre-recession levels. Although price declines were far less severe than in other parts of the country, they continue to trend modestly lower. In the commercial market, the industrial availability rate in Indianapolis was a relatively low 10.9 percent in the third quarter of 2011, but the office vacancy rate was a still high 21.4 percent. Availability rates for industrial properties have shown more downward momentum in the past year than those for office properties.

Exports continue to see strong momentum, rising 11 percent year-over-year in the third quarter, helped by a surge in shipments of transportation equipment. Flooding in Thailand disrupted the auto sector supply chain, with Toyota temporarily suspending production in Indiana in late October and November. This, and the earlier Japanese tsunami, temporarily impacted a progressing recovery in the auto sector—U.S. auto production was still up a solid 11.4 percent year-over-year in 2011, while sales in January surpassed levels seen during the Cash-for-Clunkers program in 2009. Meantime, Honda is doubling the capacity of its Civic plant in Greensburg to 200,000 per year in part due to a strong Japanese yen, adding about 1,000 jobs.

According to Dr. Sherry Cooper, Chief Economist, BMO Financial Group, "Indiana likely posted somewhat below average 1.5 percent real GDP growth in 2011, but with temporary auto supply chain disruptions in the rearview mirror, and the sector's recovery from the recession ongoing, the state should outperform slightly this year."

The full State Monitor report can be downloaded at bmocm.com/economics.

About BMO Financial Group
Based in Chicago, BMO Harris Bank N.A. provides a broad range of personal banking products and solutions through approximately 700 branches and approximately 1,350 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. Deposit and loan products and services provided by BMO Harris Bank N.A. Member FDIC. Equal Housing Lender. NMLS#401052. BMO Harris Bank(SM) and M&I® are trade names used by BMO Harris Bank N.A. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with 1,600 branches, and a retail deposit base of approximately $180 billion.