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A recovery of fits and starts.

The summertime stalling of the economic recovery seems to be becoming a habit.

After the initial U.S. recovery surge in the spring and early summer last year, the nation saw a leveling off of sales, production and construction activity in the last half of 1991. The same sectors surged again in the first quarter of this year, then began to level in the second quarter.

The Indiana economy has behaved in a similar fashion. Seasonally adjusted retail sales hit an all-time high in February, but fell back to year-end 1991 levels in the second quarter. The state's total establishment employment rose to new highs in January and February, then leveled off in the subsequent months. Indiana residential building permits issued this year rose to the highest February, March and April levels recorded since the recession began, but then leveled off in the following months.

As the surges have begun, the securities markets have reacted in fear of inflation. Each time, interest rates have abruptly stopped their descent, and they actually rose in early 1992. In a low-inflation environment, consumers and businesses alike tend to be sensitive to such sudden changes in rates, especially mortgage rates. Consequently, an air of caution has spread, promptly curtailing the growth in housing permits issued.

It appears, however, that fears of inflation have been unfounded. Therefore, chances are good that the recovery will survive and continue rising, albeit at a moderate pace.

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Title Annotation:Indiana economy
Publication:Indiana Business Magazine
Date:Oct 1, 1992
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