DATE: Wednesday, March 19, 2014
TIME: 11:00 a.m.
ROOM: D-1 of the Stratton Building, Springfield, IL
RE: To Review and Vote on Certificates of Participation from ISU and NIU
February 2014 Monthly Briefing
ECONOMY: ENTERING ANOTHER SOFT PATCH?
Edward H. Boss Jr., Chief Economist
The severe winter weather that prevailed throughout a large portion of the United States is being blamed for a rash of weak economic reports. Still, some prognosticators are raising the prospect that the economy may be experiencing a slowdown. Perhaps most affected by the inclement weather was housing activity. Sales of existing homes fell 5.1% in January and new housing starts declined 16%. At the same time it was reported the building permits, a precursor to new housing activity and presumed to be not greatly affected by the weather, fell by 5.4%. As the weather improves this spring, an overhanging factor is how the run-up in home prices and uptick in mortgage rates will affect housing activity.
Weather also may have played a role in the slower increases in payroll employment that averaged slightly fewer than 100,000 in December and January, although new claims for unemployment benefits showed little change. On the weaker side, extended unemployment claims were not renewed at year end and household energy costs have soared. The effect of these increased costs on consumers is uncertain, but it may add to the disappointing performance of retail sales last month. The consumer generally accounts for two-thirds or more of total spending in the economy. In January retail sales fell, reaching their lowest level since September. Moreover, the harsh winter continued in February so that, to the extent that weather again was the dominant factor, little near-term improvement can be expected.
The Conference Board reported that its Leading Economic Indicator Series rose a modest 0.3% in January following no change in December. It went on to report that. "If the economy is going to move on a faster track in 2014 compared to last year, consumer demand and especially investment will need to pick up significantly from their current trends." In a subsequent report, the Conference Board said its measure of Consumer Confidence fell moderately in February and January's measure was revised downward. Should the economy hit a soft patch, it would not be unusual as in each of the past five years there were times when the pace of the economy slowed noticeably, most often hitting a low point in March or June. On each occasion, however, growth subsequently resumed.
REVENUE: RECEIPTS MIXED—FEBRUARY UP MODESTLY
Jim Muschinske, Revenue Manager
Overall base revenues grew $75 million in February. The larger economically related sources of income and sales taxes were mixed. Both corporate and sales tax took a break from their recent strong performances, while personal income tax posted decent gains. A comparatively good month for federal receipts also contributed to the monthly advance.
Through two-thirds of FY 2014, base general funds are up $1.010 billion compared to last fiscal year. Much of that growth can be attributed to the one-time surge in transfers related to the refund fund [$397 million]. However, despite the occasional pause, the larger economically-related sources performed fairly well to date.