The Columbus economy should continue to outperform the state and nation this year — although investments and growth likely will decline somewhat from the torrid pace of 2012, local financial analysts said.
High-performing factors over the past year have included one of the state’s lowest unemployment rates, one of the nation’s highest job-growth markets and recruitment of new business and industry to the area.
With its high density of automotive manufacturers, Columbus’ fate continues to be tied closely to the health of the transportation sector, said Kip Wright, managing director for Columbus-based Kirr, Marbach & Co.
In the Columbus market, total manufacturing makes up more than 35 percent of the market’s total jobs. Among local employers with ties to the auto industry,
Columbus-based engine-maker Cummins is the top employer with about 7,000 jobs. Other top employers tied to the auto industry include: Faurecia, 1,600 workers; NTN Driveshaft, more than 1,300 employees; Enkei America, more than 800 employees; and Rightway Fasteners, about 250 workers.
“That part of the economy should do pretty well next year,” Wright said.
And that should benefit companies including Cummins Inc., the Honda plant in Greensburg and Aisin in Seymour.
Cummins had a record year in 2011, with sales of $18 billion and profit of $1.85 billion. Sales are expected to fall slightly for 2012, but it should still be the company’s second best year in terms of revenues.
Steve Meredith, a financial consultant with Hilliard Lyons in Columbus, has seen first-hand the impact of Cummins’ hiring in the past year. Meredith’s office is on the southwest corner of the intersection at Fifth and Washington Streets, across the street from the Cummins Irwin Office Building, which is undergoing construction to make room for more office space. A block south, Cummins this month will begin moving another 700 employees into the new portion of the Commons office building.
At certain times of the day, finding a parking spot or a place to sit down for lunch can prove challenging, Meredith said.
“The parking has been unbelievable ... because Cummins has done so much hiring,” Meredith said.
Buoyed by a strong automotive sector, the Columbus metro area in the past two years has gained jobs at a faster pace than any other of the nation’s 366 metropolitan areas.
Local employers added 7,300 jobs in the two years before November, a growth rate of nearly 17 percent, according to data from the U.S. Bureau of Labor Statistics. Only seven of the nation’s metro areas had a growth rate exceeding 10 percent.
Craig Kessler, president and chief investment officer of Columbus-based Kessler Investment Group, said he thinks Cummins will continue to do well.
The Fortune 500 engine maker is seeing dividends today from decisions that were made years or even decades ago, especially in overseas markets, Kessler said. In North America, Cummins continues to gain market share in the heavy-duty truck market.
Cummins has shown that overseas expansions can support growth in production and administrative positions at home, Kessler said.
“That is, I think, a model that many companies would be wise to follow,” he said.
Another indicator of a healthy business environment is that Columbus is developing into a regional retail hub, Kessler said.
Previously, people in south central Indiana, including Columbus, went to Bloomington, Greenwood or Indianapolis to buy clothes for school or major appliances.
“That’s really shifted over the last decade,” Kessler said.
Now Columbus is attracting shoppers from nearby cities and towns, in part because of Edinburgh Premium Outlets.
An influx of restaurants has been a factor in creating the shopping hub.
“People want to eat when they go shopping,” Kessler said.
The city’s downtown, with the new Commons, the finished upgrades to Fourth Street, new shops and restaurants also has played a big role.
“Downtown has become vibrant and a destination,” Kessler said. “You simply will not find a healthy, growing community that does not have a vibrant, well-organized downtown.”
Kessler said he expects the local economy to follow the same trajectory as last year.
“I think everything is in place ... for a continuation of what we have experienced,” he said.
On a macro level, although some uncertainties remain concerning federal taxes and spending and health care costs, the analysts also generally had a positive outlook.
The European crisis, for example, slowly is abating, Wright said. And rather than a potential drag on the global economy, any unexpected positive news out of Europe could actually boost growth next year, he said, because expectations are so low.
Hilliard Lyons is bullish on the market for this year, Meredith said.
Businesses have been making huge profits, but have been hoarding cash or buying back stocks or increasing dividends — rather than investing that cash into new machinery and employees.
“At some point in time, that has to happen,” Meredith said.
As businesses invest, they will hire, which will lower the unemployment rate and provide more people with a higher income — though Meredith cautioned that the growth likely would be gradual.