Tag Archives: Revenue Forecast

February State Economic Review: Recovery in Economic Activity Continues

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On Friday, the Washington Economic & Revenue Forecast Council released a preview of the upcoming revenue forecast.

Overall, things may be looking up.

The report states that recovery in economic activity continues in the fourth quarter of 2009, but recovery in jobs continues to lag.

Though concerns remain regarding credit to small business, the recovery of the construction sector, and the tentative nature of consumer confidence, there are reasons for positive thinking. Washington’s economy will outperform the nation, benefitting from higher overall exports and relative stability in aerospace and softwar publishing. In addition, cumulative revenue collections are on track to come in at $45-50 million above the November forecast.

Details

  • Continued tight credit for small businesses poses a significant challenge for recovery and will slow down the recovery in jobs.
  • Though consumer confidence is improving, this is tentative. Holiday shopping figures showed some evidence of a modest release of pent-up demand, but were mostly positive in growth because of the very poor results a year ago.
  • House marketing indicators are signaling a potential turnaround. Single family housing starts, sales and prices have begun to firm-up, despite the overhang of excess housing which has yet to be absorbed.
  • The state’s economy continues to lose jobs but the rate has slowed to a trickle in recent months and growth in some sectors has already turned positive. In addition, initial state unemployment claims seem to be indicating an imminent turnaround in the state’s labor market.
  • New housing construction in the state continues to improve according to housing permit data.
  • Construction employment continues to decline. It is estimated there is a one-year lag between turning points in permits and turning points in housing related construction employment.
  • Washington’s manufacturing sector is poised for a rebound
  • Washington’s personal income is now growing moderately.

Though things seem to be improving it is important to note that downside risks remain significant and at the same level as in November. There is a risk of a double-dip  or “W-shaped” recovery where economic activity lags in the fourth quarter of 2010. This is likely to happen if by the middle of next year consumer spending and confidence fails to recover as is expected.

The official February revenue forecast is scheduled for February 12.

November 19 Revenue Forecast Places Washington’s Shortfall at $2.6 Billion

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The Economic and Revenue Forecast Council convened the morning of November 19th for a sobering task: outlining the depth of our state’s budget crisis. State Economist Dr. Arun Raha characterized the situation as a “revenue-less recovery,” pointing out that, while the recession ended during the second quarter of this fiscal year, consumer confidence & spending are still too weak to adequately bolster our economy. Since sales and Business & Occupation taxes constitute the bulk of our revenue, the economic downturn has left Washington vulnerable.

Forecast estimates include an additional $760 million in revenue loss for the 2009/2011 biennium since Septemember’s forecast, a combination, according to Dr. Raha, of $97 million lost during the last two months alone, and a $663 million loss in projected taxable activity for the remainder of the biennium.

This information comes with only a handful of working weeks left before the state legislature convenes for a supplemental session. What this shortfall – and subsequent forecasts – spell for Evergreen’s budget is uncertain now, and will remain so until early 2010, after the Governor has proposed her supplemental budget. From there, state legislators will work in their respective houses to reach agreement about how the budget will look before the legislative session comes to a close in March.