The Department of Revenue’s Wisconsin Economic Outlook, released last week, details a noticeable deterioration in forecast performance, in just the eight months.
Figure 1: Real personal income (bn Ch.09$, SAAR) (thick blue, thick red), and forecast from March 2014 (Winter 2014 issue) (light blue), and November 2014 (Fall 2014 issue) (light red). Source: Wisconsin Economic Outlook, Winter 2014 and Fall 2014 issues.
2014Q1 personal income was 1% less (in log terms) than the March 2014 forecast. The forecast for 2014Q2 was revised downward by 1.1%.
The mark down in prospects makes sense once one sees the trajectory of Wisconsin economic activity, as measured by the Philadelphia Fed’s coincident indices (October figures released today):
Figure 2: Log coincident indices for Minnesota (blue), Wisconsin (red), Kansas (green), California (teal), and United States (black), all normalized to 2011M01=0. Vertical dashed line at beginning of Brown, Brownback, Dayton and Walker administrations. Source: Philadelphia Fed, and author’s calculations.
According to this measure, the cumulative growth gap between Wisconsin and the US (and Minnesota) is again widening.
The ramifications of the downgrade in economic outlook are clear. From Wisconsin Budget Blog:
