June 22, 2020
Economic experts are paying close attention to revenue collections in the coming weeks and months to get a fuller picture of Pennsylvania’s post-pandemic economic recovery. This week, the state’s Independent Fiscal Office was able to provide a bit more clarity through its June Monthly Economic Report that highlights the fiscal security of Pennsylvania’s municipalities at this point in time; analyzes consumer spending following the federal stimulus payments; and examines the retail market as businesses begin to re-open their doors.
The IFO’s report shares a tool from the University of Pittsburgh that estimates the revenue losses from the pandemic range from $833 million to $3.4 billion – which translates to anywhere from a 4 percent to 16 percent loss in municipal revenues for the current fiscal year. The tool offers low, medium and high impact scenarios with projections for the coming months, with the medium scenario projecting that between now and the fiscal year ahead an estimated 150 municipalities statewide will face cash insolvency and may not have sufficient revenues to continue operations. According to the IFO report, the primary driver is the estimated reduction in earned income tax revenues of $526 million; along with other revenue sources – amusement tax (-25 percent); parking revenue (-20 percent) and business taxes (-20 percent) that may see record percentage declines.
The IFO also highlights the U.S. Bureau of Economic Analysis’s report that U.S. personal income grew by 11.7 percent in April – largely due to unemployment compensation benefits which offset the month’s decline in wages and salaries. As to the impact of the economic stimulus package on most Americans’ spending habits, the Federal Reserve Bank of Chicago released a paper showing that average consumer spending increased by $577 (about half of the check amount) in the two week period following the payment.
Finally, last months’ re-opening of the economy showed good news on the retail sales front. According to the U.S. Census Bureau, retail sales increased by 17.7 percent – a stronger than expected recovery. The strongest re-opening was in the clothing store market, which saw a 188 percent economic rebound. This is below May 2019 levels (6.1 percent lower), signifying a “V-shaped” recovery in the near-term.
For future details, view the IFO’s full June Monthly Economic Report.
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