Flash Index: September 2016

October 3, 2016

Flash Index: September 2016

U of I Flash Index drops to lowest level since November 2012


The U. of I. Flash Index dropped to its lowest level in nearly four years in September, dropping to 104.5 from 104.8 in August. This is the lowest reading for the index since November 2012, indicating a slowing of economic growth in the state. However, the index is still well above an index level of 100, which divides growth and decline.

Both the U. S. and Illinois economies appear to have entered a new slower-growth phase of the recovery from the 2007-2009 recession, said economist J. Fred Giertz, who compiles the monthly index for the University’s Institute of Government and Public Affairs.  For 2016, the Illinois index has hovered in the 104.5 to 105.5 range compared to the 106 to 107 range most of 2014 and 2015.

“There has also been a puzzling reversal in the relationship between income growth and unemployment,” Giertz said. “The first years after the end of the recession were characterized as a ‘jobless recovery’ where the unemployment rate remained stubbornly high despite moderate growth in the economy. The last few years have produced much lower levels of unemployment even though the Gross Domestic Product has grown at slower rates.”

Illinois’ unemployment rate of 5.5 percent is now the lowest level since the end of the recession. “There is still hope that the second half of 2016 will produce stronger growth than the anemic near-1 percent growth for the first two quarters, but this has yet to materialize,” Giertz said.

Individual income and corporate tax receipts were down for the month while sales tax revenues were up slightly from the same month last year after adjusting for inflation.

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 September 30, 2016.

Research Area: Fiscal Health of Illinois

Policy Initiative: none