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Utah State Revenue Summary - Twelve Months FY2007-08 Final

Source: Utah State Tax Commission, TC-23, September 16, 2008

• World Business Confidence
• Sentiment among global businesses has not been materially affected by the renewed turmoil in global financial markets. Global businesses are worried, but this has been their mood for much of the past year since the financial shock hit. European businesses are the most nervous, followed closely by those in the U.S. and Japan. Asian businesses remain the most upbeat. A measurable improvement in assessments of present overall business conditions last week is encouraging if sustained. Expectations about the business outlook into next year remain firmly negative, however.

• The Conference Board Leading Indicators
• The Conference Board index of leading indicators fell another 0.5% in August, the third decline in the past four months. The index was pulled down by a steep drop in residential building permits and shorter delivery times for manufacturing shipments. The weakening path for the leading index indicates that the slowdown in the economy will persist. To date, the leading index is down 3.7% from its peak, an amount that equates to a mild recession.

• FOMC Meeting
• The Federal Open Market Committee held the fed funds target rate steady at 2% for the third straight meeting. The accompanying statement cites the recent turmoil in financial markets and the ongoing slowing in economic growth, but says that growth should soon pick up. The statement notes recent high inflation, but says this should ease, although it does say that "the inflation outlook remains highly uncertain." The FOMC cites both downside risks to growth and upside risks to inflation that are of "significant concern." There is no indication of a bias toward lower rates, which will disappoint financial markets. The decision to hold the fed funds target rate steady was unanimous.

• Treasury International Capital Flows
• Net foreign purchases of U.S. long-term securities dropped to only $6.1 billion in July from $53.4 billion the prior month. This was the third straight monthly decline, and it is all the more troubling because the July U.S. trade deficit had widened to $62.2 billion.

• Risk of Recession
• The chance of the U.S. falling into a recession in the next six months increased to 43% in August compared with July's 35%. The economy's problems are clearest in financial, housing and job markets. Recent data are consistent with a sharp deceleration in real GDP this quarter. Further, the odds are high that real GDP will post a negative quarter or two through the first half of next year.

• Current Account
• The U.S. current account deficit widened by 4.3% to $183.1 billion in the second quarter of 2008, from a revised $175.6 billion in the first quarter. The consensus expected the deficit to widen to $180.9 billion. The deficit on goods widened to $216.3 billion, while the surplus on services widened to $35.8 billion.

• CPI
• Top-line consumer price inflation decreased from 5.5% in July to 5.4% in August on a year-ago basis. On a month-to-month basis, the top-line CPI actually fell by 0.1% in August. Core inflation stayed level at 2.5% on a year-ago basis, but declined from 0.3% to 0.2% on a month-to-month basis. The August numbers confirm that inflation has peaked given the recent decline in world oil prices.

• Industrial Production
• Industrial production fell 1.1% in August while manufacturing production declined 1.0%. The decline in manufacturing was led by the motor vehicle and parts industry, but there was weakness across the entire sector. A plunge in utility output amplified weakness last month. Overall, the report was the weakest industrial production report so far this year. Manufacturing should continue to face significant headwinds from weakness in the domestic economy.

• State Personal Income
• U.S. personal income rose by 1.8% in the second quarter of 2008 following an increase of 0.8% in the first quarter. The second quarter increase was the fastest since the first quarter of 2007 and reflected the economic stimulus checks doled out by the government during that quarter. The Southwest and Southeast saw the fastest income growth while New England posted the slowest growth during the quarter.

• Jobless Claims
• Initial claims for unemployment insurance rose 10,000 to 455,000 for the week ending September 13. This was higher than expected. Although claims may be remaining higher than their trend of 400,000 several months ago partly because of hurricanes in the South, this increase points to a fragile labor market that may be losing even more steam.

• New Residential Construction (C20)
• Construction came in much weaker than expected in August. At a seasonally adjusted annual rate of 895,000, housing starts are 6.2% below the July estimates and permits are 8.9% below July estimates. This report suggests that the downturn is still in full swing, although construction data can be volatile.

• NAHB Housing Market Index
• The NAHB housing market index did slightly better than expected for September, coming in at a level of 18 in comparison to the forecast and consensus values of 16 and 17. While there were slight improvements in present sales and prospective buyer traffic, the largest increase is in six months' sales expectations. The data are thus the first sign that the housing market has bottomed out at a national level, even though many regions are still experiencing declining activity.

• MBA Mortgage Applications Survey
• he MBA market composite indices experienced a large increase for the week ending September 12, as a steep fall in contract rates led to a wave of refinancing. The market index was up by 33.4% for the week; this large increase almost entirely accounted for by an 88.1% surge in the refinancing index. The purchase index also went up by a slight 2.4%. As always, financial turmoil has led to a surge of refinancing applications as interest rates fall, though how many of these applications are approved is still up for grabs.

• Chain Store Sales
• ICSC chain store sales plunged 1.6% in the week ending September 13, the second consecutive decline. Year-ago growth dropped to 1.3%, the weakest since May. Working against sales in the week were the fading lift from tax rebates and an increase in gas prices.

• Oil and Gas Inventories
• Crude oil inventories declined by 6.3 million barrels for the week ending September 12, according to the Energy Information Administration. Gasoline inventories fell by 3.3 million barrels. Distillate supplies fell by 0.9 million barrels. Refinery operating capacity fell to 77.4% from 78.3%. Total domestic petroleum demand fell sharply. This report is bearish.

• Natural Gas Storage Report
• Working gas in underground storage increased by 67 billion cubic feet during the week ending September 12, above consensus expectations of a 61 bcf build.