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Archive for Saturday, October 26, 1996

PROF LOOKS FOR RISE IN INFLATION

October 26, 1996

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A Kansas University professor expects unemployment to remain low but inflation to creep up in 1997.

Don't expect any surprises in next year's economy, a Kansas University professor said.

Norman Clifford, director of research for the Institute for Public Policy and Business Research at KU, said not to expect a great deal of changes in 1997. In fact, his forecast is that next year's economy will look almost identical to 1996's.

Clifford presented his annual state and national economic outlook to a group of state business leaders Friday at KU's annual Economic Outlook Conference.

"In all the years I've done this, it's never looked so much like the year before," he said.

"Overall the Kansas economy will grow at about the same rate in 1997 as in 1996," he said, adding that the national growth in 1997 will also be the same as 1996, 2.4 percent.

Clifford uses a number of models using quarterly data to determine his forecast.

The inflation rate, which is based on the U.S. Consumer Price Index, is expected to rise from 3.1 percent in 1996 to 3.4 percent next year. For several years inflation has hovered slightly below 3 percent, he said.

While unemployment continues to drop and inflation creeps back up, Clifford expects the Federal Reserve to increase interest rates later this year or early in 1997. He isn't convinced, however, that the move will curb his anticipated inflation increase.

"The changes of the rate of inflation may not have too much of an effect on consumers; in fact, wages may go up even faster as people start to take action to protect themselves," he said. "Inflation is just too unpredictable by nature to think you can change it."

Other predictions for the state economy in 1997:

  • The number of Kansans employed will grow 1.8 percent, down from the 2.5 percent growth rate of 1996 but still well above the 1.2 percent average annual rate of growth from 1985 through 1993.
  • The number of jobs in Kansas will grow 2.2 percent, down only slightly from the 2.4 percent growth of 1996. Again, Clifford said, this is slightly above the average growth rate of jobs during the last decade.
  • The unemployment rate will be 4.1 percent in 1997, about the same as the 4.0 percent rate of 1996. These rates are down significantly from the 4.4 percent unemployment rate experienced during 1995.
  • Sectors of the Kansas economy that will exhibit strong job growth in 1997 are manufacturing, construction, transportation, public utilities, wholesale and retail trade and services.

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