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Release: Immediate

UI report predicts moderate growth in Iowa economy for 1998, 1999

IOWA CITY, Iowa -- Iowans will see moderate growth in their purchasing power for the rest of 1998 and into 1999, while employment prospects brighten in the coming year, according to the Iowa Economic Forecast released today (April 2) by the University of Iowa Institute for Economic Research.

Beth Ingram, director of the Institute, said the figures indicate real personal income (that is, adjusted for inflation) will continue to go up in the coming 21 months, but the trend is not quite as steep as it was in 1997.

"Real income will not grow as quickly in 1998 as it did in 1997," Ingram said. "However, real income is still rising, augmented by historically low rates of inflation."

The report was prepared for today's meeting of the Iowa Economic Forecasting Council in Des Moines. Ingram chairs the council.

According to the report:

-- Real personal income, or the purchasing power of Iowans' incomes when inflation is taken into account, can be expected to grow about 1.8 percent in 1998 and about 1.5 percent in 1999. For 1997, real personal income grew about 2.8 percent. For 1998, the new estimate is up from an estimate of 1.2 percent growth made in November 1997.

-- Higher growth in income is expected for the first quarter of 1998, while the remaining three quarters are expected to enjoy steady growth in the range of 1.5 percent to 1.8 percent.

-- Non-farm employment is expected to grow by 1.4 percent in 1998, compared to a November forecast of 0.4 percent, and to grow by 0.4 percent in 1999.

-- Most employment growth will be in the service sector of the economy, which is expected to experience a 3 percent increase in employment in 1998 and a 2.8 percent increase in 1999, followed by durable goods manufacturing and retail trade.

Ingram also said the Institute's model predicts that fiscal year 1998 growth in state tax revenue is likely to be around 4.6 percent, which is slightly higher than the official forecast of 2.9 percent. Early forecasts of revenue growth for 1999 indicate a lower growth rate of 1.8 percent.

The lower figures represent the effects of both state and federal tax cuts enacted during 1997. Ingram cautioned that large uncertainties remain in the revenue forecasts.

The state's Revenue Estimating Conference will meet later in the month to consider whether to change the official estimate.


EDITORS NOTE: Beth Ingram, director of the University of Iowa Institute for Economic Research, will be in Des Moines today (April 2) to present the Iowa Economic Forecast to the Iowa Economic Forecasting Council. If you'd like comments on the report today, contact Charles H. Whiteman, chair of the UI department of economics and former director of the Institute, at (319) 335-0831. Otherwise, you can reach Ingram at (319) 335-0897.