November 2008 Monthly Revenue Briefing
ECONOMY: Happy Holidays for Retailers?
Edward H. Boss, Jr., Chief Economist
There can be little doubt that we are in the midst of one of the most important times of the year, holiday shopping. With it widely accepted that the U.S. economy is in recession and with consumer spending generally accounting for two-thirds of total spending in the economy, there is fear that weak holiday spending would signal that the economic downturn is deepening. According to Shoppertrak, the holiday season got off to an okay, but not spectacular, start on Black Friday with sales up a steady 3% compared to 8% a year earlier.
While it is far too early to judge the final outcome of holiday sales for 2008, there appear to be more negative than positive forces at work. As a result, forecasts toward the lower end of the range, including prospects for an actual decline from last year, seem likely.
REVENUE: November Revenues Fall Due to Fewer Processing Days and Continued Weak Federal Sources
Jim Muschinske, Revenue Manager
November revenues fell $344 million as lower reimbursable spending caused federal sources to drop $106 million. In addition, three fewer receipting days this month in comparison to last year likely contributed to significant declines in personal income tax and sales tax. Monthly processing days often vary from year to year, although usually by only one or two days. It is very unusual for a month to gain/lose three days. Next month will benefit by having two extra receipting days.
Through November, overall base revenues are down $751 million. The majority of the decline is attributed to $402 million less from federal sources, as well as $197 million less from transfers. Throughout the first part of the fiscal year, the Commission has repeatedly raised concerns regarding revenue. Not only will items such as increased refund percentages, lower miscellaneous transfers, and lack of federal source growth, serve to hamper revenue performance—but the combined impact of those items with an economy officially in recession, spells serious budgetary problems.
The Commission’s updated forecast of FY 2009 revenues...Overall base revenues are estimated to be $29.109 billion, a decrease of $550 million or 1.9% from the previous year. The projections are based upon a significant slowing of receipts from the economically related sources as the recession begins to manifest in reduced tax collections.