Illinois economy to experience 'steady growth' in 1996, '97

By Mark Reutter

The Illinois economy, which is experiencing a strong 1995, will continue to
grow next year and in 1997, posting solid gains in employment and personal
income, UI economists predict.

Following a solid 3.2 percent inflation-adjusted growth rate so far this
year, the Gross State Product (GSP) is expected to expand 4.7 percent in
1996 and then moderate to 3.1 percent in 1997. The GSP consists of the
total dollar value of goods and services produced in Illinois.

This steady growth will boost "real" (inflation-adjusted) personal income
in the state by 3.7 percent in 1996 and 3.4 percent in 1997, rates very
close to this year's 3.5 percent pace.

Analysts at the UI Bureau of Economic and Business Research do not
anticipate a recession in the forseeable future. Instead, they suggest that
Illinois will glide to a "soft landing" of more limited growth in 1996 and
1997.

If this proves to be true, the economy will repeat its performance of the
1960s when business enjoyed eight years of uninterrupted growth. Such
expansion has not been recorded in the last 25 years.

The Illinois economy, which emerged from a sharp recession in fiscal
1990-91, has been outpacing the growth of the U.S. economy since 1994. The
same pattern is generally true throughout the Midwest, which has
outperformed both the Northeast and Pacific Coast economies in the last two
years.

Some of the nation's strongest growth has been centered in the Chicago
region, buoyed by an expanding service sector and greater intemational
trade, especially in machinery and electronics.

The manufacturing sector has been a leading factor in Illinois' current
economic expansion and is expected to grow 4.1 percent overall this year.
Growth in the sector is expected to slow next year and in 1997.
Construction and transportation are expected to remain strong through 1996,
while downstate coal mining is expected to drop steeply as a result of
industry-wide contraction.

The heightened economic activity is expected to produce more revenues for
the state government. A 4.8 percent increase in general funds revenue is
anticipated through the fiscal year ending June 30, 1997, bureau analysts
forecast. Smaller increases are expected in the growth of corporate income
tax revenue and miscellaneous tax revenue.

Perhaps chastened by a tight employment market until recently,  consumer
spending is projected to expand only moderately. An increase of 3.3 percent
is projected for this year,  followed by about 2 percent growth rates in
1996 and 1997. The increases in consumer spending will be driven primarily
by purchases of nondurable goods, according to the UI analysts.

Spending for durable goods such as automobiles and large appliances is
expected to decline this year and in 1996 after a period of robust growth.