It's forecasting season, in case you haven't noticed.  That means it's time for economists and analysts of every persuasion to come up with their crystal ball vision of the coming year, be it for the stock market, the economy, or even the state budget deficit.  Even if the forecasts aren't always right on the mark, it’s a good exercise to go through, when it's done right.  Setting aside a little time to calmly analyze where the key factors that determine our economic fate are heading can sometimes produce startling results.

Most of us are content to let others do the day-to-day reading of the tea leaves when it comes to guessing which way the economic winds are blowing.  After all, aside from a few investment-oriented companies and financial institutions, business plans that are underway cannot change with every new market report, so why bury yourself in the numbers?

But since we don't devote much time to forecasting, our impressions of where the economy is heading are usually formed from fragmented information.  Unfortunately, the "common wisdom" concerning the economy that is developed in the major business periodicals, which inevitably seeps its way into our thinking, often turns out to be quite inaccurate.  And statements made about the economy during an election year are usually the worst of them all.  

Consider, for example, the prevailing sentiment about the U.S. economy in the wake of the September 11 terrorist attacks.  Many casual commentators proclaimed that the attacks themselves "caused" a recession by freezing travel and consumer spending, and that it would take until the mid-point of 2002 to see the end of it.  But consumer spending never really faltered, and the economy was growing even as those dour thoughts were being expressed.

That's why it’s a good idea to occasionally close your office door and calmly examine the main drivers for your business -- as well as for the overall economy -- to see where they might be heading.  Doing so can give you a sense of perspective that is too often lost in the glare of economic headlines.

What does that perspective tell us about the prospects for the overall economy in 2003?  Ball State economist Gary Santoni reminds us, in the words of Milton Friedman, that economic growth can resemble the path of a helium balloon, bounding up against a gradually upward ramping ceiling.  When the balloon has a shallow dip down, as we have experienced in this fairly mild recession, there's not a lot of room for a bounce back up to the trend.  So we should not be surprised to see this recovery lacking the zip that some of us are wishing for.  

In fact, a look at the track record of the overall economy, as revealed by the data on Gross Domestic Product, reveals that we have actually maintained an average quarterly growth rate of about 3 percent over the last four quarters.  That's hardly a feeble performance.  There's plenty to worry about, of course.  There's always plenty to worry about.  But we should not lose sight of the fact that the economy is still growing, inflation is very low, and interest rates are quite attractive.

When you climb down from 30,000 feet to study the economy in more detail, the warts and weaknesses are more apparent.  In particular, the manufacturing sector, so vital to the Indiana economy, has had a bumpy ride.  The last few months of overall factory output, not to mention October's motor vehicle sales, have hardly been encouraging.  Even the booming housing industry, the economy's last remaining superstar, has failed to give locally important industries like furniture a much needed boost.

Even if the national economy is cleared for continued recovery in 2003, the prospects for a bounce back in Indiana 's fortunes await a clearer signal that manufacturing's woes are behind us.