Looking like rainy days ahead for nation's economy

Posted 2/12/16

It’s time to cut and save at all levels of government. The reason: the economy may be slowing. A Feb. 3 report by the state’s nonpartisan Legislative Analyst’s Office found, “December and January income tax collections came in modestly short …

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Looking like rainy days ahead for nation's economy

Posted

It’s time to cut and save at all levels of government. The reason: the economy may be slowing. A Feb. 3 report by the state’s nonpartisan Legislative Analyst’s Office found, “December and January income tax collections came in modestly short of projections.” And for fiscal year 2015-16, which ends June 30, “to date, based on this preliminary data, the state’s income taxes are a combined $167 million under the revised administration projections. ... The possibility now exists for some revenue deterioration between now and the May Revision.”

It’s not a $20 billion crash in revenues, such as occurred during the Great Recession, but a caution light about spending by the state. Local governments also should take note because large amounts of their funding come from the state.

The global economy also is showing signs of weakness. Yesterday, the stock market again took a dive, with the S&P 500 down 1.4 percent. For the year, the index is down 9.3 percent.

A couple of other indicators also are worrisome. One is the Baltic Dry Index, which tracks maritime trade of commodities. The Feb. 7 Financial Times reported average charter rates in December were “already at the lowest level since the Baltic Dry Index started in 1985,” but they now have declined “every day so far in 2016.”

According to Business Insider, this “measure of international trade often seen as a bellwether for the global economy has crashed to its lowest level ever, fueling fears we could be heading for another 2008-style crash,” which was preceded by a large decline in the index.

Another sour indicator is the six weeks in a row of declines in the Stoxx Europe 600 Banks Index, “its longest weekly losing stretch since 2008, when banks booked 10 weeks of losses,” MarketWatch reported yesterday.

Whether or not a recession hits, what’s clear is that the belt-tightening Gov. Jerry Brown urged in his Jan. 21 State of the State address needs to pervade all levels of state and local government.

We would extend that to his favored projects, high-speed rail and the Delta tunnels.

It’s time to cut and save at all levels of government. The reason: the economy may be slowing. A Feb. 3 report by the state’s nonpartisan Legislative Analyst’s Office found, “December and January income tax collections came in modestly short of projections.” And for fiscal year 2015-16, which ends June 30, “to date, based on this preliminary data, the state’s income taxes are a combined $167 million under the revised administration projections. ... [T]he possibility now exists for some revenue deterioration between now and the May Revision.”

It’s not a $20 billion crash in revenues, such as occurred during the Great Recession, but a caution light about spending by the state. Local governments also should take note because large amounts of their funding come from the state.

The global economy also is showing signs of weakness. Yesterday, the stock market again took a dive, with the S&P 500 down 1.4 percent. For the year, the index is down 9.3 percent.

A couple of other indicators also are worrisome. One is the Baltic Dry Index, which tracks maritime trade of commodities. The Feb. 7 Financial Times reported average charter rates in December were “already at the lowest level since the Baltic Dry Index started in 1985,” but they now have declined “every day so far in 2016.”

According to Business Insider, this “measure of international trade often seen as a bellwether for the global economy has crashed to its lowest level ever, fueling fears we could be heading for another 2008-style crash,” which was preceded by a large decline in the index.

Another sour indicator is the six weeks in a row of declines in the Stoxx Europe 600 Banks Index, “its longest weekly losing stretch since 2008, when banks booked 10 weeks of losses,” MarketWatch reported yesterday.

Whether or not a recession hits, what’s clear is that the belt-tightening Gov. Jerry Brown urged in his Jan. 21 State of the State address needs to pervade all levels of state and local government. We would extend that to his favored projects, high-speed rail and the Delta tunnels.

— The Orange County Register