Urbana – The U of I Flash Index for January 2023 continued to decline slowly, falling to 103.1 from the 103.3 level in December 2022.
The lower index reading does not mean the Illinois economy is contracting because any reading above 100 indicates growth.
“This extends the slow decline of the index that began in May of last year. This reflects the slowing of growth after the remarkable recovery from the steep decline during the beginning of the Covid crisis. Illinois and the national economies are still growing but at a slower rate.”
Giertz said the mixed economic signals that have characterized recent months continue to make it difficult to determine whether the slowing economy is moving toward a soft landing or a recession in 2023. On the positive side, national GDP grew at a healthy 2.9% rate during the fourth quarter of 2022 continuing a strong second half of 2022 after a slow first six months. Most observers expect slower growth in 2023. There are also signs that the unexpectedly high rate of inflation that emerged in early 2022 is moderating. This has sparked hope that the Federal Reserve may slow interest rate increases that have created a headwind for the economy. However, the buoyant housing market of the last two years has slowed considerably, and layoffs have been announced in a number of high-profile firms. There is also concern that a slowing world economy will impact the U. S.
In Illinois, basic tax revenues continued their return to more normal levels after the unexpected (and not fully understood) strength during the recovery from the Covid recession. All three components (individual income, corporate and sales tax receipts) for the month were lower in real terms compared to the especially strong levels of January 2022.
“The Illinois unemployment rate remained stable at 4.7%, well above the national rate of 3.5%.”
The Flash Index is 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 revenues 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 January 31, 2023. Nearly three years since the beginning of the COVID-19 crisis, ad hoc adjustments are still needed because of the timing of the tax receipts resulting from state and Federal changes in payment dates.
“This extends the slow decline of the index that began in May of last year. This reflects the slowing of growth after the remarkable recovery from the steep decline during the beginning of the Covid crisis. Illinois and the national economies are still growing but at a slower rate.”