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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

11/4/2002


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.

line chart showing slight upward movement