Iowa Economic Forecast Projects 1.8 Percent Income Growth In 2002
Beth Ingram, Institute director and UI professor of economics, said the forecast is based on state income data through the second quarter of 2002. Real income growth for 2003 is expected to be 2.6 percent in 2003, down from 2.7 percent forecasted in September.
Revenue growth for the current fiscal year, FY03, stands at 1.6 percent. The Institute is forecasting a growth rate of 2.1 percent for state tax revenue in the current year, followed by 1 percent revenue growth in FY 2004 and 1.6 percent in 2005.
In Iowa, Ingram notes that the recession is indicated by a slowing in the growth rate of nominal income from approximately 5 percent to approximately 3 percent. The Institute forecast is for a return, over the period of 2003-2007, to a nominal income growth rate of approximately 4 percent.
Ingram pointed to two factors that explain the slowdown in revenue growth: the decline in growth of nominal income over the course of the recession, and a shift in the relationship between tax revenue growth and income growth.
"As Iowa income improves over the next year, tax revenue growth is expected to rise. However, revenue growth is not expected to return to the levels observed in the 1990s. In the current forecast, nominal income growth of 4 percent is expected to produce revenue growth in the 1.5 to 2 percent range," she said.
The Institute's forecast also anticipates a decline of employment growth in Iowa in 2002 of 0.5 percent (-.5 percent growth), but rising by 1.3 percent in 2003.
The Institute submitted the report to the Iowa Economic Forecasting Council and the Revenue Estimating Conference; the Revenue Estimating Conference meets today (Dec. 6) in Des Moines. For more information, contact Ingram at (319) 335-0897, or firstname.lastname@example.org.
Contact: George McCrory, UI News Service, 319-384-0012