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Economist says state revenue will meet estimates

By TED CARTER

Mississippi will see economic growth in the year ahead but not the size typical in most years.

That’s the mixed outlook State Economist Darrin Webb gave the Mississippi Joint Legislative Budget Committee Monday.

template“We expect Mississippi’s economy will grow 1.7 percent in 2015 relative to 2014,” Webb told the committee. “Our current projections are for a 2.2 percent growth in 2016 for real GDP and 1.1 percent gain in jobs.”

Webb said legislators can expect the state to reach its fiscal 2016 General Fund estimate. Revenue collections since the July 1 start of fiscal 2016 are up 4.5 percent over the year ago and $23.5 million above the estimate made at the close of the 2015 legislative session last spring, according to Webb.

The spring estimate was for 2.2 percent growth over fiscal 2015 collections. Most of the overage has come from taxes on income tax and insurance premiums. But because the bulk of the income-tax overage occurred in August, it can’t be an indicator of how those collections will go the rest of the year, Webb said.

Webb emphasized that while the outlook for 2016 is hardly a cause for cheers, it is a welcome improvement over the recession the state slipped into in 2013 and 2014 and is only now leaving behind.

“The state’s 2015 economy appears to be improved relative to 2014 – that is, several measures show stronger growth this year relative to last. You need to be aware, however, that growth remains below our long-term history as well as that of other states,” Webb said in his legislative outlook briefing.

News that Mississippi’s Gross Domestic Product declined by 1.1 percent in 2013 and 1.2 percent in 2014 came from the U.S. Bureau of Economic Analysis in June. The Bureau said the slumping numbers showed up in a recalculation of the state’s economic activity during the two years.

templateWebb said he expects the 2014 numbers will be revised yet again, and this time show either flat growth or less of a decline. Yet the slippage “was more than a modest contraction,” Webb said at the Economic Outlook Fall Forum earlier this month at Jackson’s Millsaps University.

“The 2013 slowdown was far more severe than we realized,” he said, attributing much of the decline to reductions at oil refineries. Much of 2014’s negative growth can be blamed on on drop-offs in construction that occurred with completion of Mississippi Power’s multi-billion-dollar Kemper coal plant, Webb added.

Webb said several indicators show stronger growth this year “relative to last year.”

Beware, however, that current growth remains “below our long-term history as well as that of other states,” Webb said at the budget committee briefing.

The growth rebound is showing up in such economic indicators as employment, real earnings and average weekly hours worked that make up the Mississippi Index of Coincident Indicators, he said. The indicators rose 2.7 percent in the first seven months of 2015 over the same period last year, according to Webb, who cited figures from the Philadelphia Federal Reserve.

“This compares to a 1.9 percent growth rate in 2014.  It also is compared to 3.7 percent nationally – the national growth is a full percent higher than Mississippi,” Webb said. “On the other hand, we have seen a steady strengthening in the growth relative to six-months prior in this index, suggesting that the state’s economy is gaining some momentum.”

Some of that growth is showing up in state tax collections through August, with revenue collections exceeding state estimates of last spring by $23.5 million. Income tax collections are $28.3 million above the spring estimates and gaming taxes $800,000. But sales tax collections fell $9.4 million below the estimates, according to Department of revenue figures.

Sales tax collections for the 31 days of August slipped $8.3 million lower than estimates, the DOR reported. For the same period income tax collections rose $33.7 million above the earlier estimates, the DOR said.

Webb cited an absence of income growth as a big contributor to dropping retail sales. “Sales tax collections for calendar year 2015 through August are up a meager 0.5 percent after adjusting for inflation.  This compares to 1.8 percent for all of 2014,” Webb said.

He said he views the slow sales tax collections as surprising given the lower fuel prices, and speculated, “Mississippians, like their national counterparts, may be using their gasoline dividend to pay down debt and build up savings.”

Webb’s report to legislators put job growth through August at 0.9 percent, slightly ahead of the 0.8 percent for the same period of 2014.

While Mississippi’s employment growth is about half that of the nation’s, the growth is broad and occurring in most all sectors, he said.

The exceptions are the mining and construction sectors, with one hurt by lower oil prices and the other by adjustments relating to the Kemper plant, according to Webb.

“Mississippi manufacturing employment is up 1.2 percent for the year and average work-week length has improved considerably since hitting a low in January,” he said. “This is especially impressive in light of the slowing activity taking place in this industry at the national level as evidenced by the ISM Index of U.S. Manufacturing Activity.”

Statewide building permit numbers are encouraging, having climbed “a healthy 13.9 percent relative to 2014, out-pacing national growth of 10.8 percent,” he said. “Mississippi home builders appear to be enjoying a rebound from an especially sluggish 2014.”

Also, gaming revenues are on a rebound of sorts, with totals exceeding 2014’s first seven months by 2.2 percent, Webb noted. “The gaming industry has largely struggled since 2001 with few years seeing a positive gain, so the gain in 2015 is noteworthy. Casinos have been very aggressive with their lodging promotions.  Additionally the lower fuel prices make going to casinos a little easier.”

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