Commission on Government Forecasting and Accountability
HOUSE
C.D. Davidsmeyer, Co-Chair
SENATE
Heather Steans, Co-Chair
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August 2018 Monthly Briefing
ECONOMY: EXPORTS STRENGTHEN DESPITE UNCERTAINTIES
Julie Bae, Pension Analyst/Economic Specialist

Current measures of U.S. economic performance have been impressive: a solid labor market, low unemployment rate, and a gradually rising inflation rate to the Fed’s preferable level. The Fed has been tightening monetary policy by raising short-term interest rates while closely watching the economy since late 2015; at the same time, the European Central Bank (ECB) conducted a stimulus program, keeping its interest rates quite low. With other factors including a strong U.S. economy, the two opposite monetary policies by the Fed and ECB caused the U.S. dollar to be more attractive to foreign investors as interest rates on dollar deposits would be higher than interest rates on euro deposits. This led to a higher demand, and a stronger U.S. dollar.

REVENUE: AUGUST REVENUES DOWN — REFLECTING LAST YEAR’S STRONG FEDERAL RECEIPTS
Jim Muschinske, Revenue Manager

Base revenues fell $145 million excluding $150 million of interfund borrowing executed in August 2017. The drop in receipts was essentially due to comparatively weaker federal sources. August of last fiscal year enjoyed increased reimbursable spending and subsequent federal sources made possible by the aforementioned interfund borrowing as well as fund sweeps. The month had the same number of receipting days as the prior year.
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Excluding interfund borrowing last fiscal year, the first two months of FY 2019 show general funds ahead of last year by $197 million. Gross personal income tax is up by $514 million, or $432 million net. The gain is partially due to timing associated with last year’s rate increase which took time to be fully integrated. Similarly, gross corporate income taxes are up by $59 million, or $49 million net.