Chesterton Tribune

IUN professors compile economic activity index for Northwest Indiana

Back to Front Page
 

 

 
 

 

 

The Northwest Indiana economy is seeing about the same level of economic activity as it did in 1992. And there are no indications of a rapid turnaround in the next few months.

That information comes courtesy of an index created by two Indiana University Northwest professors from the School of Business and Economics: Professor of Finance Bala Arshanapalli and Professor Emeritus of Economics Don Coffin.

“After a significant growth in the local economy of the 1990s, the region’s growth has been stagnant the last decade,” said Arshanapalli in a statement released last week.

He and Coffin have spent the past year developing the Northwest Indiana Index, a research project intended accurately to gauge the dynamics of the region’s economy while at the same time estimating the probability of an upcoming change in local economic activity.

The index has two components: the Northwest Indiana Coincident Index, which provides a monthly snapshot of the region’s progress; and the Northwest Indiana Leading Index, which forecasts how the Coincident Index will change in the next six months.

“This data should be particularly interesting to public officials, as well as those in banking and real estate,” Coffin said. “Or really anyone interested in trends in local economic development.”

A Lilly Sustaining Grant Fellowship funded the research and provided Arshanapalli and Coffin with the assistance of Vicki Urbanik, a student in the business school’s post-baccalaureate certificate program in accounting.

Urbanik—the Chesterton Tribune community editor—has assisted the team by researching the coincident and leading economic indicators developed by other states and regions to collect comparable data.

“Most states, including Indiana, have developed indicators representative of their statewide economies,” Urbanik said. “But it’s far less common for regions, like Northwest Indiana, to have such an index. In my opinion, this project will help Northwest Indiana stand out as a leader in planning for a more prosperous economy. As a lifelong Northwest Indiana resident who is very hopeful about our region’s economic future, I was thrilled to be given a chance to participate in this work.”

The Northwest Indiana Index measures economic data from January 1992 onward. Arshanapalli and Coffin noted two important findings when reviewing data from the last 20 years, the statement said. “First, the region’s economy began slowing down in early 2000, much earlier than the nation’s economy. As a result, the region experienced a deeper and longer-lasting recession than the U.S. economy. Additionally, the timing of the region’s last downturn was roughly similar to that of the nation’s downturn. Locally, that slowdown began in May 2008 and lasted through May 2009.”

“Future data mined from the Leading Index will serve as a timely and useful signal of shifts in business cycle phases and will help to predict impending expansion or contraction of the local economy,” the statement said.

Coffin explained that their key set of leading economic variables should produce a negative reading prior to the onset of a recession and vice-versa for any uptick in the economy. “In general, three consecutive monthly drops in the Northwest Indiana Leading Index would signal an upcoming recession. Three straight increases would signal an expansion,” he said.

Urbanik said she views any monthly drops as an opportunity, not a threat.

“The Northwest Indiana Index data shows some serious challenges,” Urbanik said. “But as I’ve learned both from being a student and from personal experiences, even seemingly insurmountable problems present an opportunity—the opportunity to tap into existing resources to find long-lasting solutions. The key for all of us who live, work and study in Northwest Indiana is to use our ingenuity and creativity to harness the incredible strengths in our region for our long-term sustainability.”

The Northwest Indiana Index will be updated monthly and published at www.nwitimes.com/business/special-section/index/

 

 

 

Posted 8/7/2012