Sales tax collection continues to decline

The rate of decline in Sales and use tax collection paused in September after declining sharply in August.  Using a weighted composite for the four largest states (California, Texas, New York, and Florida), the decline in real growth rose slightly to an annual decline rate of -3.28% in September which was up from the rate of -3.59% in August. Texas grew at a rate of 3.87% after adjustments for inflation in September down from 4.06% in August.  This is down from the hot pace of 8.37% it averaged for 2007. New York declined at a annual rate of -2.98%. California's decline was at -5.52% in September.  California declined on average of -2.03% in 2007. Florida continued its steady fall, declining -8.98% in September. The growth rate in Florida has been lower than the previous month for 23 months straight. Florida averaged a decline of -2.70% in 2007.

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Sales and Use tax collection declines rapidly

The decline in Sales and use tax collection is starting to accelerate. Using a weighted composite for the four largest states (California, Texas, New York, and Florida), the decline in real growth fell by an annual decline rate of 3.59% in August which was significantly down from the rate of -2.13% in July. Texas grew at a rate of 4.06% in August after adjustments for inflation which is down from the hot pace of 8.37% it averaged for 2007. New York's growth declined sharply to -3.05%. California's decline was at -6.42% in August. This is the biggest decline since March 2002. California declined on average of -2.03% in 2007. Florida continued its steady fall, declining -8.97% in August. The growth rate in Florida has been lower than the previous month for 22 months straight. Florida averaged a decline of -2.70% in 2007.

New York State is officially in recession according to the NY State's Budget director, Laura Anglin. She notes that the state's five last contractions averaged 25 months, more than double the national average of 11 months. California and Florida have also been in recession. The Philadelphia Federal Reserve publishes a map showing the quarterly change in economic activity at the state level. Here is their description of the Index:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average).

The latest map for July is dramatically different from the February 2008 map.

Here is the July 2008 map:

Here is the February 2008 map:

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Sales and Use Tax Collection improves slightly but is still declining

Sales and use tax collection continues to decline after adjustments for inflation. Using a weighted composite for the four largest states (California, Texas, New York, and Florida), the decline in real growth improved slightly to an annual decline rate of -2.13% in July up from a rate of -2.20% in June. Texas grew at a rate of 4.49% in July after adjustments for inflation which is down from the hot pace of 8.37% it averaged for 2007. New York's growth was flat at 0.04%. California's decline was at -4.88% in July, the same as it was in June.  California declined on average of -2.03% in 2007. Florida continued its steady fall, declining -8.46% in July. The growth rate in Florida has been lower than the previous month for 21 months straight.  Florida averaged a decline of -2.70% in 2007.

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Sales and use tax collection still shrinking

Sales and use tax collection continues to decline after adjustments for inflation.  Using a weighted composite for the four largest states (California, Texas, New York, and Florida), the decline in real growth improved slightly from an annual decline rate of -2.41% in May to -2.20% in June. Texas grew at a rate of 4.16% in June after adjustments for inflation which is down from the hot pace of 8.37% it averaged for 2007. New York, dipped back to negative growth after seeing year over year growth for four months in a row.  California's decline slowed to -4.88% in June up from -5.85% in May.  California declined on average of -2.03% in 2007. Florida continued its steady fall, declining -8.34% in June. Florida averaged a decline of -2.70% in 2007.

Spending is taking a turn for the worse after almost making breaking into the positive side in April.  It is looking like America will not be able to stave off the looming recession.

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Sales Tax revenue is flat

Sales and Use Tax is mixed for the four largest states in the U.S. In California, sales tax collections for the last 12 months is down 3.54% compared to a 12 month period ending a year ago. Florida is down 5.76%. Both California and Florida are in a recession. Texas continues to show strong growth and is up 6.63%. New York is also growing at a pace of 2.67%. The composite of all 4 weighted for GDP contribution is flat at a -0.09%. Together these 4 states account for about a third of U.S. GDP.

Sales and Use tax revenue has stalled. Even in Florida and California, the acceleration downward has leveled off. We appear to be in a wait and see mode.

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Sales Tax collection declines at a slower pace

The decline in Sales and use tax collection has slowed in the last couple of months. Using a weighted composite for the four largest states (California, Texas, New York, and Florida, real growth slowed from an annual decline rate of -1.64% in February to -0.91% in March. Texas grew at a rate of 5.27% in April after adjustments for inflation which is down from the hot pace of 8.37% it averaged for 2007. New York, moving in the opposite direction, came in at 1.63% in March after averaging -3.51% for 2007. California is rapidly improving with a decline of 1.67% in April, an improvement from its low reached in February of -5.54%. California declined on average of -2.03% in 2007. Florida continued its fall, declining -7.45% in March, its lowest point since 2000. Florida averaged a decline of -2.70% in 2007.

The improvements in the sales tax mirror the recent economic indicators showing a lukewarm economy, but not one that is in a deep recession.

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Sales Tax Revenue falls faster in California and Florida

Year over Year Sales and Use Tax Revenue fell in California by 5.54% last month. Florida’s Sales Tax Revenue fell by 7.23% and is declining faster than it did during 2001 Recession. With consumer spending down that much, both states are clearly in recessions. New York grew by 0.29% over the low point reached last February. Texas continued its strong performance, growing by 6.64%.

As discussed in this previous post, these states 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. Averaged together weighted by GDP contribution, the composite for the 4 states fell by 1.62%. Florida and California are two of the hardest hit states in terms of housing depreciation. If housing prices continue to slide, consumer spending will problably continue to be weak.

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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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