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Flash Economic Index rose slightly in October
J.
Fred Giertz, Institute of Government and Public Affairs
(217) 244-4822
Mark
Reutter, Business Editor
(217) 333-0568; mreutter@illinois.edu
11/4/02
EDITORS,
NEWS DIRECTORS: The Flash Index of Economic Growth, produced by economists
at the University of Illinois, is based on the most up-to-date information
on the Illinois economy.
CHAMPAIGN,
Ill. — The University of Illinois Flash Economic Index rose slightly
in October to 95.6 from the 95.4 level recorded for the previous three
months (July 1 through Sept. 30).
The reading – below the 100 dividing line between growth and contraction
– illustrates the halting performance of the Illinois economy,
which mirrors that of the nation. For the last several months, good
news seems to have been offset almost immediately by bad news.
For example, the U.S. Department of Commerce has reported that third-quarter
growth was strong at 3.1 percent, while the second quarter was weak
– and the stock market rose dramatically in October. On the negative
side, unemployment was up slightly and manufacturing continued to be
weak, including Midwest production.
There is a growing consensus that the Federal Reserve will cut interest
rates to provide some added momentum for the economy. "This can
also be viewed as either good or bad news," said J. Fred Giertz,
the Illinois economist who released the October Flash reading. "It
suggests that the Fed will continue to take an active role in stabilizing
the economy, but it also implies that Alan Greenspan and his Fed colleagues
think the recovery is weaker than expected."
In Illinois, tax receipts are coming in more slowly than expected. The
state bureau of the budget recently lowered revenue forecasts for the
fiscal year, further squeezing the state’s tight budget. All three
components of the Flash Index were down in real (inflation-adjusted)
terms compared with October a year ago. Overall, the Index was at 98.4
a year ago.
The Flash Index is a weighted average of Illinois growth rates in corporate
earnings, consumer spending and personal income. Tax receipts from corporate
income, personal income and retail sales are adjusted for inflation
before growth rates are calculated. The growth rate for each component
is then calculated for the 12-month period using data through Oct. 31.
