U of I Flash Index climbs in August

September 1, 2017

U of I Flash Index climbs in August

Reverses two months of decline

Authors

The University of Illinois Flash Index reversed two months of slippage in August, climbing to 104.5 from 104.3 in July. The measure of economic activity in Illinois has remained in the 104-105 range of growth for 14 consecutive months. View the Flash Index history.

“As was the case last month, the August index was impacted by the transition to new higher individual and corporate income tax rates in Illinois,” said University of Illinois economist J. Fred Giertz, who compiles the index for the Institute of Government and Public Affairs. Income tax rates went up July 1 with the passage of a new state budget.

The index is constructed using the individual income tax, the corporate tax, and sales tax revenue figures that are available on a monthly basis. These provide indicators of personal income, retail sales, and business profits.  Index readings of 100 and higher indicate economic growth, while readings lower than 100 indicate contraction.

“It is likely that August revenues still reflect an unknown mixture of the two rates,” Giertz said. “In  addition, the monthly pattern of corporate collections has changed, adding to the difficulty.

U. S. economic growth for the second quarter reached 3 percent, the highest in more than two years. The Illinois unemployment rate rose very slightly to 4.8 percent from 4.7 percent the previous month. 

“This is still low be recent standards,” Giertz said. “The expansion since the end of the recession has been slow by historical standards, but it has been unusually long. The existing combination of unemployment and inflation is unusually low.”

In the state, both the short term revenue problems and school funding issues have been resolved. This should reduce the uncertainly created by the two-year impasse in Springfield, Giertz said. Unfortunately, these changes have done little to address Illinois’ longer term budget problems, he said.

Normally, 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 August 31, 2017.

 

 


Research Area: Economic Policy

Policy Initiative: Flash Index

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