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Iowa Economic Forecast projects weak state income growth for 2001

In its latest Iowa Economic Forecast, the University of Iowa Institute for Economic Research predicts weak income growth for 2001 and increase only slightly into 2002.

Beth Ingram, Institute director and UI professor of economics said the forecast for real personal income growth in Iowa stands at 1.3 percent for 2001, down from 2 percent projection in June. This forecast is based on state income data through the first quarter of 2001 and national income data through the second quarter of 2001. The Institute released its report Friday, Sept. 28 at the Iowa Economic Forecasting Council meeting in Des Moines.

Ingram said the fourth quarter ending Dec. 31, 2000 was especially weak in Iowa; real personal income fell at an annual rate of 0.09 percent. "We now expect second quarter growth in Iowa to be a paltry 0.7 percent, while third quarter income will decline by 1.1 percent, for a growth rate of –1.1 percent," she said. The overall income forecast for 2002 has been revised to 3 percent, down from 3.6 percent forecast in June.

"However, our forecast indicates that income growth will pick up in the fourth quarter of 2001, but this does not take into account any additional economic consequences of the events of Sept. 11," Ingram said.

On a year-over-year basis, employment in the state fell by 0.7 percent in the second quarter of 2001. In June, the Institute forecast virtually no growth in employment in Iowa this year. It now expects employment to decline by approximately half a percent, for a growth rate of –0.5 percent.

"This downward revision has also dampened our expectation for employment growth in 2002; we now expect employment to grow by 1.5 percent instead of the 2.1 percent forecast in June," Ingram explained.

The Institute also expects that the rate of state revenue growth will be slow compared to historical standards, with revenue growth hovering between 3 and 4 percent over the next three years.


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