Minnesota Management and Budget (MMB) released the October Economic Update on Thursday, October 10th. The report can be found on the MMB web page at http://www.mmb.state.mn.us/ Below is key information in a question and answer format.
What is the October Economic Update?
This report, issued by MMB, details Minnesota’s revenue receipts for the first quarter of FY 2014 and briefly summarizes the condition of the U.S. economy. The economic summary is derived from a forecast MMB receives from HIS Global Insight (GI), Minnesota’s macro-economic consultant.
What did the October Economic Update say about Minnesota’s revenue receipts?
Revenue receipts for the first quarter FY 2014 are $2 million less than projected in the February Forecast.
What did the October Economic Update say about the US economy?
The U.S. economy has grown in 2013 but this growth seems to be slowing. Real GDP in the 2nd quarter of 2013 grew at 2.5 percent with 1.9 percent predicted for the last half of 2013. Job increases average 180,000 per month for the past twelve months but only 150,000 per month for the last three months. Because of this growth, Minnesota was able to record a surplus of $636 million at the end of FY 2012-2013 which was used to pay down the K-12 school shift.
What does this say about the upcoming November Forecast issued after Thanksgiving?
The (GI) forecast as outlined in the October Economic Update usually does not change much in the November Forecast. GI’s October forecast is more negative than the February Forecast. Minnesota’s February Forecast predicted GDP growth of 2.8 percent in 2014 and 3.3 percent in 2015. The October Economic Update reduces this estimate to 2.5 percent in 2014 and 3.2 percent in 2015. These numbers seem to signal that the November Forecast will not yield a sizable surplus and could be lower than most people anticipate.
What impact will the federal government shutdown have on Minnesota?
The impact of the federal government shutdown will be felt more in areas with higher concentrations of federal workers. Washington, D.C. along with Maryland and Virginia will be particularly hard hit. Federal employment and spending in Minnesota is much lower so the impact of the shutdown will be much less evident. Whether or not the shutdown will have a lasting effect on the economy will depend on a combination of the following factors: 1) will furloughed workers get back pay; 2) how long with the shutdown last; 3) will the federal government exceed its debt limit; and 4) how will global markets respond.