August 2017 Monthly Briefing
ECONOMY: ILLINOIS EXPORTS STRENGTHEN
Edward H. Boss Jr., Chief Economist
Illinois exports rose in June 2017 to $5822.1 million, the highest level since April 2014. The increase represents a continuation of a recent upward movement, reversing the downward trend that developed in late 2015. Emphasis on trade has intensified in recent years as the U.S has had the largest trade deficits since 1975. The greatest deficit is with China which makes up 40% of the U.S deficit, the second is with Japan, and the third Germany. The continued U.S. trade deficits together with proposed and current trade agreements have become major issues. The trans-pacific trade pact (TTP) has been very divisive. Supporters say it would be a boon to the nations involved and a pivot to Asia, binding the participants closer to the U.S. Opponents see this as a loss of control and acts to further perpetuate the export of U.S. manufacturing jobs.
NAFTA (North American Trade Agreement) is the largest world’s trade agreement and the deficit the U.S. has with its partners is in the process of being renegotiated. Both Mexico and Canada are likely to want to keep NAFTA largely as is with its duty free trade among the countries. On the other end of the spectrum, the U.S. is expected to push for significant changes. In a speech in Arizona, the President expressed doubts as to whether a compromise to save NAFTA could be reached as the countries involved remain far apart.
The recent rise in exports in part reflects improvement in economic activity from economies abroad and an increase in their demand for both manufactured and non-manufactured goods. Moreover, U.S. price competitiveness has benefited from a weakening in the strength of the dollar. At the same time, manufacturing jobs have been bolstered with U.S. employment rising and the unemployment rate falling. Finally, announcements of new and proposed manufacturing sites coming into the U.S. from other countries augers well for further export improvement. Still uncertain, will be the effect on U.S. exports from renegotiated or cancellation of trade agreements.
REVENUE: AUGUST GAINS REFLECT TAX RATE CHANGES, FUND SWEEPS/INTERFUND BORROWING AND STRONG FEDERAL SOURCES
Jim Muschinske, Revenue Manager
Excluding $150 million in proceeds from interfund borrowing, base general funds revenues increased $814 million in August. Not surprisingly, gains were experienced in income taxes, reflecting the recently enacted higher tax rates. In addition to the aforementioned interfund borrowing, $126 million in funds sweeps also was executed of the total allowable amount of $293 million [P.A. 100-23]. These additional one-time revenues contributed to comparatively stronger reimbursable spending and resulting federal reimbursements.
Excluding the recent $150 million from interfund borrowing, base general funds grew $1.049 billion during the first two months of the fiscal year. Increased income tax receipts stemming from the recently enacted higher tax rates, fund sweeps as well as a surge in federal sources resulted in this large gain.