Economic experts from Indiana University South Bend’s Judd Leighton School of Business and Economics and IU Bloomington’s Kelley School of Business are forecasting how the economy could fare in 2025. The consensus is that there are things to be optimistic about but also risk in the year ahead.
The panel presented their Futurecast at IU South Bend, trying to predict trends in the labor market, inflation and the markets. IU South Bend’s Leighton School of Business and Economics has been presenting the panel each year since 1972.
“It looks like we’re coming into more normal times, but there are some risks out there,” said Chad Ham, associate professor of accounting at the Kelley School of Business at IU Bloomington.
Hong Zhuang, director of the Bureau of Business and Economic Research at IU South Bend, said the local economy could be impacted by lower interest rates which may spur consumer spending.
“The other good news is that the inflation rate has come down. If it continues to fall, we can expect more interest rates cuts. That will increase investment and consumer spending,” she said.
But Zhuang noted there are risks to the economy. She said the average savings rate has fallen for most Americans and household debt reached a record high in 2024.
Ham said while the country has been dealing with turbulent inflation, inflationary pressures should continue to ease, with core inflation nearing 2.3% in 2025.
“There are always risks that could throw a wrench into that. One is geopolitical issues around the world. Those could potentially affect the world economy, and that could trickle down to the U.S. economy. That risk is always going to be there,” he said.
Another concern is the national debt. Higher interest rates mean servicing that debt can be more problematic for the country and could impact the economy in the long term.
Marina Niessner, assistant professor of finance at the Kelley School of Business, sees reasons to be optimistic about the financial markets in 2025. She thinks we’ll see medium growth in the coming year.
“The incoming administration’s promise to cut regulations will be popular for the business community, but there is a lot of uncertainty about inflation right now. If tariffs are imposed on other countries, we could see retaliatory tariffs,” she said.
A bigger concern for Niessner is that more consumers are financing purchases with debt. In the short run that’s not a problem, but she said it makes the economy more fragile.
The experts predict that Indiana will see steady income growth next year, while employment growth will slow. Indiana is projected to maintain an unemployment rate under 5%, which is similar to what’s predicted nationally.
With northern Indiana’s dependence on manufacturing, Carol Rogers, director of the Indiana Business Research Center at IU Bloomington, sees optimism in predictions that consumer consumption is expected to stay strong through 2027.
“Manufacturing is continuing to punch above its weight in Indiana. What we’re witnessing right now is the number of manufacturing jobs in Indiana have started a slow decline. But the productivity of those jobs is increasing. We’ve seen this play out in the RV industry,” she said.
Rogers said Hoosiers need to be prepared for the number of jobs in manufacturing to continue shrinking because of automation and artificial intelligence aided jobs.
“It’s important for Hoosiers to recognize the kind of skills they’re going to need and understand how those technologies are changing our jobs. We’ve lost 20,000 manufacturing jobs over the past 24 months, but professional and technical services jobs are growing,” Rogers said.
