Sales Tax Revenue is falling in 3 of the 4 biggest states suggesting a recession

Sales and Use Tax Revenue has been falling in Florida. It has leveled off in California and New York. Texas still shows solid gains, but the pace is starting to slow slightly. When adjusted for inflation, California and New York are both declining. The last time this happened was during and immediately after the 2001 recession.

California, Texas, New York, and Florida are the 4 largest states in terms of contribution to GDP. In 2006, California contributed 13.2%; Texas, 8.1%; New York, 7.8%; and Florida, 5.4%. Together they accounted for 34.6% of GDP.

Next is a chart showing a composite weighted according to the above contributions. This chart is adjusted for inflation using Core CPI-U.

This chart compares the composite Sales Tax with GDP and the S & P 500. Sales tax appears to be a good leading indicator for GDP. The U.S. Consumer plays an important role in GDP. In the fourth quarter of 2007, Personal Consumption Expenditures comprised 70.5% of GDP. Sales tax numbers are released a couple of weeks after the month’s end. We won’t have the GDP numbers for January through March until the end of April. The S & P 500 started to rise from its low after the 2001 recession after the Composite started to show real growth. The S & P 500 fell from its high reached in 2007 after the Composite started to show real negative growth.

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