The UI Flash Index slipped to a four-year low in July, falling to 102.1 from its 102.3 level in June.
The slippage from the level it had held for two consecutive months dropped the index to its lowest reading since August 2004. Despite the drop, the overall implications of the index remain the same: a serious slowdown of the Illinois economy, but no recession yet, said economist J. Fred Giertz, who produces the Flash Index for the university’s Institute of Government and Public Affairs.
An index reading above 100 indicates economic growth in the state. Somewhat surprisingly, the national economy actually grew more rapidly in the second quarter with a growth rate of 1.9 percent in real terms, more than double the 0.9 percent rate of the first quarter, Giertz said.
“This may be an indication that the slowdown is over, but it may also be a reflection of the federal stimulus package coming into play during this period,” he said. “Exports continue to be a strong positive for the economy. The real estate sector remains a problem, but does not appear to be getting worse.”
The unemployment rate is up both nationally and in Illinois. The 6.8 percent rate in Illinois for June is the highest since October 2003 and employment growth has stopped. “If there is any good news here, it is that the unemployment rate is a lagging indicator. It reflects what has happened, not what is going to happen,” Giertz said. “Overall, the Illinois economy has clearly slowed, but it has the advantage of strong export industries including agriculture and a real estate sector impacted less severely than many other states.”
As with the June index, all three components of the index (individual income tax, corporate tax, and sales tax receipts) were up modestly in real terms from the same month last year, Giertz said. 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 July 31, 2008.