Despite lingering inflation, spending boosts economy, professor says

Network Indiana

MUNCIE — The economy is doing great, and the proof is in your spending habits, says an economist in central Indiana.

“Out of ten, I would say it’s (the economy) about a nine,” says Michael Hicks, economist at Ball State University, “it’s an astonishingly good year despite what I think a lot of folks have been hearing, particularly about inflation.”

Hicks tells IndyPolitics he’s not necessarily concerned with the various data points shared by a variety of different economists. He looks at spending and investing trends across the country, explaining that if the economy seems to be strong and reliable, people will spend more money, build more businesses, and invest more money.

Hicks says those are the kinds of trends he’s been seeing as of late, “here in Indiana, new home construction remains relatively strong, prices are up. We see consumption at record levels – this has been a record Christmas consumption in dollar terms. New business starts are at record pace across the country. The survey data asking people how they feel about the economy is very much at odds with how they are behaving.”

During the last State of the State address in January, Indiana Gov. Eric Holcomb praised the state of Indiana for its positive handling of its economic status.

“Our revenues increased. Our taxes and debt decreased. Since 2017, we’ve paid down our state debt by 31-percent,” said Governor Holcomb during that speech.

“People are very rational,” Hicks continues, “if they expect the economy to look down, if they’re worried about their job they tend to save, spend down on credit card debt, and tend not to be involved in expansionary consumption behavior.”

Hicks says at the fundamental level, when it comes to things like job creation and real inflation-adjusted wage growth, all of those things are doing “surprisingly well.”