Growth next year? The quiet resurgence of the industrial economy.

• Position: INDIANA INDICATORS

IT'S THE TIME OF YEAR TO get out our crystal balls and ask the deceptively simple question: what kind of year will 2006 be for Indiana's economy? This year, like any other year, finds us making up lists of what's going right, and what's going wrong, in the economic environment that ultimately determines our fate.

Let's start with the good news on the economy It may surprise some of you to know that there is plenty to choose from. Topping the list has to be the surprisingly robust health of the national economy From the vantage point of November, the coming year is shaping up to be a very respectable one for overall economic growth. We should see growth only slightly down from this year, with a mild increase in inflation and interest rates.

There's plenty to worry about in the national economy, of course. The trade deficit, the low savings rate of American households, and the unwinding of the housing price spiral are just a few things that come to mind. But overall growth isn't on the list. And while it takes more than growth in the U.S. economy for the Indiana economy to prosper, it's almost impossible for our state to go forward when the rest of the country is not.

The pattern of that growth, at least to this point in time, has been quite friendly to Indiana businesses as well. One of the best-kept secrets has been the quiet resurgence of the industrial economy In the last two years, output in factories across the country has rebounded from its post-recession low, with growth making up and now surpassing the losses sustained in the first three years of the decade.

That growth has helped our manufacturing-based state economy rebound as well. Since the low point of mid-2003, manufacturing employment statewide has stabilized and even managed a bit of growth.

Businesses today have plenty of cash, and their brisk spending on capital goods and equipment has kept plenty of Indiana business' order books full. But the extra stimulus to Indiana from the industrial boom nationally is starting to wind down. I expect to see a reduced trajectory of growth for the U.S. manufacturing sector next year, and this tops my list of concerns for the state in the coming year.

For some analysts, the recent weakness in statewide job growth is also a concern. But it's not on my list, at least not yet, and here's why

For several years running, the preliminary data on employment have done a much more accurate job counting the job losses than they have done in tallying...