Flash Index makes first increase since COVID-19 triggered an economic downturn

July 1, 2020

Flash Index makes first increase since COVID-19 triggered an economic downturn

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The U of I Flash Index registered a modest gain in June to 93.1 from its 92.8 level in May. This is the first increase since the COVID-19-induced recession began in February of this year, but the index remains short of the 100-dividing line between growth and decline

The National Bureau of Economic Research moved the fastest it ever has to officially name the downturn a recession, indicating the precipitousness of the impact of the virus. The index is far below its pre-recession level of 105.7 in February.

“While it is good news that the decline of the index has stopped, the national and Illinois economies face continued uncertainty with both upside and downside shocks possible depending on the spread of the virus and the reopening process,” said University of Illinois economist J. Fred Giertz, who compiles the monthly index for the Institute of Government and Public Affairs. Giertz said there are unanswered questions. “Is the decline really over? What will be the speed of the recovery? This obviously depends in large part on the containment of the virus.”

There are some hopeful signs including the strength of equity markets and the modest decline in the unemployment rate from 17.2% to 15.2% in Illinois. The impact on Illinois appears more severe than the national average with the state’s rate exceeding the national rate by 1.9 percentage points compared to virtual equality in February.

In June, individual income receipts were up compared to last year, likely because of the change in the federal and state filing deadline. Corporate and sales tax receipts were down.

The Flash Index is normally a weighted average of Illinois growth rates in corporate earnings, consumer spending and personal income as estimated from receipts for corporate income, individual income and retail sales taxes. These 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, 2020.

For the last four months, several ad hoc adjustments were made to deal with the timing of the tax receipts resulting from state and federal changes in payment dates that were made to lessen the impact of the closures.

 


Research Area: Fiscal Health of Illinois

Policy Initiative: Flash Index

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