Flash Index decline slows in May, after crash spurred by COVID-19 pandemic

June 1, 2020

Flash Index decline slows in May, after crash spurred by COVID-19 pandemic


The U of I Flash Index fell again in May, but at a much slower rate than in the preceding two months.

The index fell to 92.8 in May from its 94.2 level in April, after a precipitous fall from its 105.7 reading in February. See the full Flash Index Archive.

“The Illinois economy appears to be steadying, but at a much lower level compared to the pre-crisis environment,” said University of Illinois economist J. Fred Giertz, who compiles the monthly index for the Institute of Government and Public Affairs. “The financial markets have made a surprising recovery, although it is unclear whether this reflects intrinsic optimism or unprecedented support from the Federal Reserve.” The federal government has also provided substantial income support. As a result, incomes may not have fallen as much as economic output because early estimates suggest that some of this infusion has found its way into savings, Giertz said.

The state’s unemployment rate shot up to 16.4% in April from 3.4% in February, going from a post-World War II low to a high in just two months. Some of the pain of this change has been buffered, at least temporarily, by quick unemployment compensation increases.

“Not surprisingly, there is great uncertainty about the economy,” Giertz said. “First, there is the issue of the progression of the pandemic. Is it really under control? Then, there is the question of the strength of the recovery when it comes. Opinions differ as to whether there will be a strong rebound because of the strength of the pre-crisis economy or whether the impacts will continue to slow the recovery for many months.”

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 May 31, 2020. For the last three 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 made to provide some flexibility to taxpayers.

Research Area: Fiscal and Economic Policy

Policy Initiative: none