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Release: Immediate

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

IOWA CITY, Iowa -- Iowans will continue to see moderate growth in their purchasing power for the rest of 1998 and into 1999, while employment prospects brighten considerably in the coming year, according to the Iowa Economic Forecast released today (June 24) by the University of Iowa Institute for Economic Research.

The report, prepared by Beth Ingram, associate professor of economics and director of the Institute, forecasts a 3.1 percent increase in real personal income (that is, adjusted for inflation) for 1998. That's an increase over the 1.8 percent growth forecast in April, but also reflects an adjustment in figures for 1997.

"Our forecast is for personal income growth to stabilize in the neighborhood of 2 percent over the course of 1999 and 2000," Ingram wrote. "Personal income growth should be relatively evenly distributed over the final quarters of 1998 with a slightly higher rate of growth forecast for the fourth quarter."

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

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 3.1 percent in 1998 and about 2 percent in 1999. For 1997, real personal income grew about 1.6 percent, less than the April estimate of 2.7 percent for the past year. For 1998, the new estimate is up from an estimate of 1.8 percent growth made in April.

-- Income grew about 3 percent in the first quarter of 1998, higher than the forecast of 2.4 percent.

-- Non-farm employment is expected to grow by 2 percent in 1998, compared to the April forecast of 1.4 percent, and to grow by 0.6 percent in 1999.

-- Most employment growth will be in the service sector of the economy, which is expected to experience a 3.3 percent increase in 1998; employment in durable goods manufacturing is expected to increase 2.1 percent.

-- Employment in non-durable manufacturing retail trade is expected to rise 1.7 percent in 1998, compared to the predicted fall of 0.7 percent for the year that was predicted in April. The change reflects a much stronger employment picture in the sector for 1997 than originally expected.

The Institute's model also predicts that fiscal year 1999 growth in state tax revenue is likely to be around 1 percent, while early forecasts of revenue growth for 2000 indicate a growth rate of about 6 percent.

The figures represent the effects of both state and federal tax cuts enacted during 1997 and 1998. The report cautions 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: Charles H. Whiteman, chair of the UI department of economics and former director of the Institute, will be in Des Moines today (June 24) to present the Iowa Economic Forecast to the Iowa Economic Forecasting Council. He will be available for comments later today at (319) 335-0831.