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Top 5 Industries in Indiana: Which Parts of the Economy Are Strongest?

By    |   Sunday, 05 Apr 2015 01:57 PM

The Indiana economy is growing at a robust pace, with real GDP expected to expand 2.7 percent in 2015, according to the bi-annual U.S. State Monitor Report from BMO Economics. This will be the fourth year in a row of growth above 2 percent. Here's a look at the top five industries in Indiana:

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1. Auto Industry

Auto manufacturing is still the leading sector, although it is neck and neck with life sciences, according to Dr. Tim Slaper, director of economic analysis at Indiana University Kelley School of Business.

"The auto sector has clearly helped the employment picture in the state, with durable goods manufacturing employment up 6 percent year-over-year,” said Robert Kavcic, senior economist at BMO Capital Markets. "Adding above-average growth in hours worked and wages to the equation leaves the state with one of the better performing labor markets in America."

Manufacturing, largely related to transportation, accounts for one in four of the state’s jobs, said Dr. Michael Hicks, professor of economics and director of the Center for Business and Economic Research at Ball State University in Muncie. That includes a GM truck plant in Fort Wayne and Honda, Toyota and Subaru assembly plants, Rolls Royce and Cummins engine plants, plus high powered turbine engines for defense.

After the financial crunch the recreational vehicle business, centered in Elkhart County, consolidated and recovered from very high unemployment. Indiana now accounts for about 80 percent of the RVs produced in the country, and Elkhart County, now has 20,000 employees a day commuting in from other counties.

2. Life Sciences 

Life sciences is a strong performer, said Slater, although the fluctuating definitions of what to include in that category make it hard to measure performance from one year to the next.

“Life sciences is medical devices, pharma and some agriculture as well, like plant biology,” he explained. “And they will even throw in some agricultural chemicals as well.” Health IT and medical product distribution are included some years and kicked out the next, he added, frustrating economists trying to measure what is going on.

Warsaw is known as the "Orthopedic Capital of the World" with more than 50 manufacturers and the state has more than 300 FDA-registered medical device manufacturers. The business has been hit with a 2.3 percent excise tax as part of the funding for the Affordable Care Act, also known as Obamacare.

Republican Sen. Dan Coats has called for a repeal of the excise tax, “Medical device manufacturers directly employ 20,000 Hoosiers and indirectly support thousands of additional jobs. These are jobs that pay, on average, 56 percent higher wages than the average wage rate in Indiana.”

Democratic Sen. Joe Donnelly agrees, “For two years this tax has sapped value-added jobs and vitality from mature firms and start-ups alike, as it is applied whether a company has profits or not. Every 20 minutes, the equivalent of a $68,000-a-year job disappears from the balance sheet of a company in this sector. That's the toll of a tax that claims $1.8 billion a year from our nation's most innovative industry.”

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3. Transportation

The third most important industry in the state in transportation. Indiana, which calls itself “The Crossroads of America,” boasts that 75 percent of the nation’s population is within a day’s drive, making trucking, rail, warehousing and distribution a vital sector, fed by ports on Lake Michigan and the Ohio River.

4. Information Technology

Information technology (IT) especially in IT-related marketing and measuring of online advertising is a surprising growth industry. Hicks said the two hottest locations for this advertising IT are in Austin, Texas, and Indianapolis. In both areas universities are cranking out graduates with technology and business savvy.

5. Research and Design

Hicks said that a lot of the dollar value in manufacturing comes from research and design, which is a billion dollar business just in university research.

“The dollars flowing into bio sciences are just stunning, and you can create a lab in Indiana for a fraction of what it costs in Boston, and the scientists at Purdue or Indiana University are just as good as those at MIT.” Even nondescript factories often house IT specialists using CAD-CAM to design parts and monitor manufacturing.

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The state has supported the R&D and industries reliant on it by creating training programs for people who will work on the production lines.

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The Indiana economy is growing at a robust pace, with real GDP expected to expand 2.7 percent in 2015. This will be the fourth year in a row of growth above 2 percent. Here's a look at the state's top five industries.
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