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Iowa Economic Forecast Projects Increased Income Growth

According to its latest Iowa Economic Forecast, the University of Iowa Institute for Economic Research expects real personal income growth of 2.8 percent in 2004, up from a forecast of 2.3 percent in May. For 2005, the Institute projects real income growth in the state to be 2.4 percent, up slightly from 2.3 percent in the May forecast.

Charles Whiteman, Institute director and UI professor of economics, said the forecast is based on state income data through the first quarter of 2004. He attributed the changes in the forecast to stronger than expected growth in real personal income in the first quarter of 2004.

The Institute's forecast for employment in Iowa has not changed substantially since May. The forecast includes a 1 percent growth rate in employment for 2004, and an increase of 2.1 percent in 2005. The corresponding numbers for the May forecast were 1.1 percent and 2 percent.

The revenue forecast of 1.9 percent growth for fiscal year 2005 reflects modest income growth coupled with the revenue diminishing effects of tax law changes made prior to 2004 and, most importantly, tax law changes made in 2004. In the latter case, the Iowa Department of Revenue estimates that total revenues will be $62.5 million lower, primarily because of the restoration of the phase-out of sales taxes on utilities.

The Board of Regents, State of Iowa created the Institute for Economic Research in July 1975 to facilitate cohesive and continuing economic research, and to establish a formal mechanism for providing interaction with, and economic research services to, government and industry. Each quarter, the Institute produces the Iowa Economic Forecast, which contains quantitative forecasts of economic conditions and tax revenues for the State of Iowa, using the latest advances in econometrics.


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