Iowa's economy is based on agriculture. Although the value of the state's manufactures exceeds the value of its farm production, manufacturing is basically farm-centered. The major industries are food processing and the manufacture of agriculture-related products, such as farm machinery.
Periodic recessions—and especially the Great Depression of the 1930s—have afflicted Iowa farmers and adversely affected the state's entire economy. But technological progress in agriculture and the proliferation of manufacturing industries have enabled Iowans to enjoy general prosperity since World War II. Because the state's population is scattered, the growth of light manufacturing has extended to hundreds of towns and cities.
In the late 1970s, the state's major economic problem was inflation, which boosted the cost of farm equipment and fertilizers. In the early 1980s, high interest rates and falling land prices created serious economic difficulties for farmers and contributed to the continuing decline of the farm population. By 1992, the state had recovered, but annual growth rates remained comparatively low. At the end of the 20th century, growth rates accelerated somewhat (from 1.7% in 1998 to 3% in 1999 to 4.8% in 2000), but then fell to 1.4% in the national recession of 2001. The recession's impact on Indiana's unemployment rate was relatively mild, as the increase peaked at 4.4% in January 2002, and then fell to 3.9% by the end of the year. From 1997 to 2001, manufacturing output decreased almost every year in both absolute and relative terms, declining 5.7% in absolute terms across these five years, and, as a share of total state output, from about 25% in 1997 to 21% of the total in 200.1. During the same period, output from general services increased 28.6%, from financial services, 24.4%; from the transportation and utilities sector, 23.7%, and from the government sector, 21.6%. Performance in Iowa's agricultural sector was positive in 2002 largely because Iowa escaped the drought that was hampering output in other states and the prices received by Iowa farmers.
Iowa's gross state product in 2001 was 30th largest among the states at $90.9 billion, to which manufacturing contributed $19.1 billion; general services$16.2 billion; financial services, $14.6 billion; trade, $14.5 billion; government, 21.6% and transportation and public utilities, $7.6 billion. The public sector constituted 12.4% of gross state product in 2001.