Indiana's special sectors outlook for 2009.

November 2008

Manufacturing

Carol D'Amico: President and Chief Executive Officer, Conexus Indiana

Manufacturing has been the heart of Indiana's economy for generations, and we continue to be one of the nation's most manufacturing-intensive economies--nearly one in five Hoosiers is employed in manufacturing industries, which contribute more than $58 billion to state gross domestic product.

Indiana's manufacturing sector cannot be immune from the downturn in the national economy. 2008 saw a decline of two million units in the light vehicle market, with a further drop of 200,000 vehicles forecast in 2009, according to the University of Michigan. The poor performance of automakers like General Motors may manifest itself in cutbacks and "temporary idlings" at Indiana plants. The outlook for U.S. exports is also pessimistic as other industrialized economies slip into negative growth, which could pull Indiana's exports down from the record levels they have enjoyed over the past several years (driven primarily by manufactured goods).

However, Indiana offers several countervailing trends that may allow us to weather the national storm better than many. The state has ranked number one in attracting new jobs through foreign investment on a per capita basis for two years running. (1) In all, since 2005, Indiana has attracted approximately $4 billion in new manufacturing investment, accounting for nearly 30,000 new job commitments. These job gains will help offset the losses that we may suffer.

Indiana's manufacturing sector also boasts strengths in pharmaceutical and medical device production, areas that are more resistant to economic cycles. Over the last few years, companies like the Cook Group, Baxter Pharmaceuticals, and Zimmer have announced the creation of thousands of well-paying jobs. As pharmaceutical outsourcing trends continue, Indiana's cluster of contract manufacturers (like Cook Pharmica) should benefit accordingly.

Indiana also has the potential to capitalize on the growth of the "clean technologies" sector, areas like fuel cells, biofuels, solar, and wind power--projected to more than triple over the next decade to represent a $255 billion industry by 2017. (2) With a strong cluster of innovation-minded automotive manufacturers, public-private collaborations are emerging to push development of "next generation" plug-in electric vehicles and other green manufacturing initiatives in the state. These efforts may pay dividends as early as...