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UI Flash Economic Index continues its decline


J. Fred Giertz, Institute of Government and Public Affairs,
(217) 244-4822


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

9/4/2001

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.

Graph showing Illinois Flash Economic index in decline.
The Illinois index is a measure of future economic activity (100 = no growth). Analysis by the Institute of Government and Public Affairs, University of Illinois.

CHAMPAIGN, Ill. — The University of Illinois Flash Economic Index continued its decline, falling to 98.0 in August from its 98.3 level in July.

The Index has been below 100 (the dividing line between economic growth and contraction) in the last four months and in five of the last six months. It is at its lowest level since June 1992.

"Illinois economy is in a no-growth situation much like the national economy," said J. Fred Giertz, a UI economist who released the Flash Index today (Sept. 4). "The national Gross Domestic Product barely grew at a 0.2 percent annual rate in the second quarter of 2001. Even though a recession so far has been technically avoided, both the national and state economies are clearly suffering a severe slowdown."

Giertz pointed out that the UI Flash Index cannot be compared directly to the national GDP growth rate. The UI Index overweights corporate profits compared to their relative size in the economy. Because corporate profits have been the weakest component recently, this has pulled the Flash reading below 100, though the state economy may not be in actual decline.

All three components of the Index fell in real terms compared to a year ago, with corporate receipts experiencing the largest percentage shortfall. In August a year ago, the Index stood at 102.3.

The UI 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 Aug. 31.