Flash index: Growth slow but steady
URBANA — The University of Illinois flash index dropped slightly in June, indicating slow but steady growth in the Illinois economy, according to the economist who compiles the index.
The index — a weighted average of growth rates in corporate earnings, consumer spending and personal income — fell from 106.2 in May to 106 in June.
Index readings over 100 indicate economic growth, while readings below 100 indicate contraction. For the past year, the index has remained in a range between 106 to 107.2, but has been at the lower end of that range for the past six months.
"The lower recent readings likely reflect the unusually harsh winter," said Giertz, who compiles the index for the UI Institute of Government and Public Affairs.
Giertz explained that growth rates used in figuring the June index are calculated for the 12-month period ending in June, so they reflect the slowdown in sales that occurred in the first quarter of the year.
That "lingering effect" will continue to be the case until next January, when the effects of the first-quarter slowdown will begin to disappear from the calculations.
In June, individual income tax receipts and sales tax receipts were up from June 2013, when adjusted for inflation. Corporate tax receipts, however, were down from a year earlier.
Giertz noted that national Gross Domestic Product declined by 2.9 percent in the first quarter of 2014.
"Most observers view this as a blip in the recovery and expect the economy to grow more rapidly over the remainder of the year," he said.
But Giertz said growth for full-year 2014 will more likely be in the lower 2 percent range rather than the 3 percent range enjoyed in the last half of 2013.
Discussing the economy at large, Giertz said two common fears are that the economy is stalling and not increasing as fast as folks would like, and that the nation might encounter deflation in the short term.
In the longer term, there are concerns about inflation as a result of big increases in the money supply, he said. Although some economists see "the potential for a lot of inflation in the future," there has not been much evidence of it so far.
"They've been wrong year after year. Inflation may come back much stronger, but we will not see much in the next six months or a year," he said.
Giertz noted that the Illinois unemployment rate fell to 7.5 percent in May, but remains above the national rate of 6.2 percent.
The differential is declining compared with last year, when the Illinois rate was 2 percentage points above the national average.
During the last decade, Illinois has rarely had a lower unemployment rate than the nation's, and several reasons explain that, Giertz said.
Illinois has a "cyclical problem associated with the recession," but also has "its own special problems," including the state's budget situation and its long-term fiscal outlook, he said.
Plus, Illinois isn't as heavily into automobile production as Michigan, Indiana and Ohio are, so it's not sharing in the recovery as much as those states are, he said.
What intrigues Giertz the most at this point, he said, is whether the nation is having a slow recovery from the severe 2007-09 recession, or whether slow growth is the "new normal."