July 2016 Monthly Briefing
ECONOMY: AT A STANDSTILL
Edward H. Boss Jr., Chief Economist
The economy slowed sharply with real GDP rising at an annual rate of 1.2% in the second quarter, less than half than expected. Moreover, the first quarter’s gain was revised downward to 0.8%. If the second half of the year was to repeat that of the first half, growth would be held to 1.0% this year.
The disappointment in GDP largely reflects a reduction in inventories. Business spending also fell with a retrenchment in spending on structures and equipment. Even residential investment declined. The major contributor to growth was the consumer. It is hoped that their spending will encourage business to restock inventories and increase spending.
In assessing economic conditions in terms of maximum employment and price stability, the Federal Open Market Committee voted to maintain the current stance of monetary policy. There can be little doubt that the labor market has improved. The national unemployment rate is 4.9% with the Midwest at 4.7%. A recurrence in manufacturing in the rust belt drove the Midwest unemployment rate below the national rate, a gap that continues.
Illinois with a 6.2% unemployment rate is an exception. After reaching a peak in July 2012, the level of Illinois manufacturing jobs edged downward, and is now 12,400 below that peak. Announcements by Caterpillar to cut as many as 5,000 employees by the end of this year, which could climb to more than 10,000 through 2018, do not auger well for manufacturing jobs in Illinois.
REVENUE: FY 2017 BEGINS WITH WEAK JULY
Jim Muschinske, Revenue Manager
Overall base revenues fell $109 million in July as the majority of sources experienced declines. Two less receipting days this July as compared to last year undoubtedly contributed to the fall off.
Gross personal income tax dropped $77 million, or $72 million net of refunds. Other sources declined by $8 million, corporate franchise taxes fell $5 million, cigarette tax dipped $4 million, insurance taxes were down $3 million, and public utility taxes were $1 million lower.
Only a few sources managed gains for the month. Sales taxes finished on an up note, rising $32 million, while inheritance tax and interest income both managed to eke out a $1 million gain.
Transfers into the general funds declined by $8 million in July. While the lottery transfer grew $16 million, likely due to timing of last month’s transfer, other transfers offset that growth falling $23 million. Riverboat transfers dipped $1 million. Federal sources started the year by declining $6 million in July.
UPDATED CGFA FY 2017 REVENUE ESTIMATE
The Commission’s FY 2017 estimate presented in early March, 2016 was $31.912 billion. A review of that estimate (based on current law), including actual performance over the final third of the fiscal year, FY 2016 actuals, updated economic measures, and certified refund percentages, results in an updated forecast of $30.883 billion. See following summary and detailed estimate on page 9.