98 years of economic insights for Indiana

The IBR is a publication of the Indiana Business Research Center at IU's Kelley School of Business.

Executive Editor, Carol O. Rogers
Managing Editor, Brittany L. Hotchkiss

Outlook for 2003

Kelley School of Business, Indiana University, Bloomington

After the longest economic expansion in U.S. history, the economy slipped into recession in March 2001. Fortunately, it turned out to be fairly short and fairly mild. We estimate that the recession ended in the first quarter of 2002. That makes it less than a year in length. The peak to trough decline in real Gross Domestic Product (GDP) was only 0.6 percent. Both in depth and duration, this was a minor recession.

The recovery now under way has also been modest. Real economic growth has averaged 3.0 percent over the last four calendar quarters, a solid performance but not spectacular. The questions we face as we look to 2003 are many. Will the economy continue to grow? Will the recovery accelerate? Will inflation remain in check? What are the domestic and international risks we face?

The articles that follow address these questions and others. Bill Witte gives us an overview of the national economy and the major domestic issues we face. Andreas Hauskrecht provides background on the international economy, a key factor in the prospects for the U.S. economy. Robert Neal and Bill Sartoris examine the financial markets and give some clues on where interest rates and equity prices might be heading. Jeffrey Fisher analyzes the housing market, which has been a bright spot in the economy through the last few troubled years. Finally, Morton Marcus compares how Indiana and the U.S. have reacted to the recession.