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Flash Economic Index fell in June, raising issue of whether state economy is slowing

Mark Reutter, Business Editor
(217) 333-0568; mreutter@illinois.edu

7/3/
2000

 

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 state economy.

CHAMPAIGN, Ill. -- The University of Illinois Flash Economic Index fell to 102.8 in June, raising the question of whether the state economy is slowing.

Even though the Illinois economy grew last month, the rate of expansion dropped from the 103.2 rate of April and May.

"The key question is whether the June decline is the first sign of the much-awaited slowdown resulting from the efforts of the Federal Reserve or is simply a downward blip that will be reversed," said J. Fred Giertz, an economist at the UI Institute of Government and Public Affairs, who released the Flash reading today (July 3).

The Federal Reserve has raised interest rates in an effort to cool the economy, especially the once high-flying stock markets.

"The readings in the next few months should clarify which direction the economy is going," said Giertz, emphasizing that the current growth rate -- combined with low inflation and low unemployment -- makes for a strong economy. Both sales- and individual-income tax receipts in Illinois were up last month compared with June a year ago, but reduced corporate-tax receipts pulled the Index down.

The June drop came after eight months of growth after an Index low of 101.8 last October.

The Flash Index is a weighted average of growth rates in consumer spending, personal income and corporate earnings. Tax receipts 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 June 30. Any reading above 100 means the state economy is expanding, while any number below 100 means the economy is shrinking.