BLOOMINGTON, Ind. – Economists at Indiana University believe we could see a recession next year, but the economy’s future isn’t entirely clear.

Business owners are feeling the impact of inflation and continued interest rate increases. For Bloomington real estate broker Tracee Lutes, showings have dropped in half from this time last year.

“People aren’t able to buy as big of a home as they would like to have,” said Lutes, co-owner of RE/MAX Acclaimed Properties. “They’re choosing not to move up from their current homes and buy more space.”

That’s because of the ongoing interest rate hikes meant to slow inflation, Lutes said.

Higher costs continue to be an issue across all industries. Don Weiler of Bailey Weiler Design + Build says he’s not building as many homes as he used to.

“Just the cost of new construction, as they stated here today, has gone up 35% at least over the last few years,” he said.

Weiler and Lutes were among the business owners attending a seminar in Bloomington Thursday with the IU Kelley School of Business, whose economists shared their economic outlook for 2023.

Inflation is likely to slow down next year, but so will the economy, explained assistant professor Andrew Butters. That’s because the Federal Reserve will continue to raise interest rates, which is meant to discourage spending and therefore reduce inflation, he said.

“Consumers are still mostly spending even at the elevated rates of inflation,” Butters said. “But basically how much that slows down could really be the pivot point.”

That means that slowdown may lead to a recession in 2023, but it’s unlikely to be anything near historic levels, Butters said.

With low unemployment, continued job creation and inflation, economist Kyle Anderson points out there’s good and bad news for the economy right now. That makes it hard to predict what that recession could look like, he said.

“It’s definitely in the cards that that would happen next year,” Anderson said. “And it might be a mild recession. Hopefully it won’t be too severe.”

Still, business owners in Bloomington say they’re holding out hope.

“I believe this was really a smart slowdown, so to speak, with the rates and things,” Lutes said. “I think it needed to happen.”