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Flash Index Indicates Double-Dip Recession Unlikely

A significant gain in economic recovery indicates that a double-dip recession may be unlikely, according to IGPA's Flash Index.

The University of Illinois Flash Index moved up an entire point to 97.8 in June, a substantial improvement from its May reading and continuing a string of consecutive monthly improvement that began in May 2010.

The Flash Index, compiled by the Institute of Government and Public Affairs (IGPA), measures economic activity based upon receipts for personal income, corporate income and retail sales taxes. The Flash Index reached its highest reading since December 2008 and has increased every month for the last 14 months.

The index is now approaching 100, which is the traditional dividing line between growth and decline, said IGPA economist J. Fred Giertz. “The increase in the index suggests that the much discussed double-dip recession is not very likely, although the slow recovery from the recession continues,” Giertz said.

The June increase in the Flash Index coincides with a surprisingly large increase in the June Midwest Purchasing Managers Index.

After adjustment for the individual and corporate income tax rate increases earlier this year, corporate and sales tax receipts were up in real terms compared to the same month last year while individual income tax receipts were down slightly.

The Flash Index is a weighted average of Illinois growth rates in corporate earnings, consumer spending and personal income. Tax receipts from corporate income, personal income and retail sales are adjusted for inflation before growth rates are calculated. The growth rate for each component is then calculated for the 12-month period using data through June 30, 2011.