Service Activity in The South Atlantic: August
From the Federal Reserve Bank of Richmond’s latest survey of service-sector activity in the South Atlantic (District of Columbia, Maryland, North Carolina, South Carolina, Virginia and West Virginia):
Service sector activity pulled back in August, according to the latest survey by the Federal Reserve Bank of Richmond. After three months of nearly flat sales, overall retail revenues declined, led by a sharp drop in big-ticket sales. Depressed shopper traffic added to the slump in retail activity. Merchants reduced inventories as they predicted weak demand for their products in the coming six months. Revenues at non-retail services firms also dropped in August, following five months of mild expansion. Services providers softened their outlook regarding demand for their services in the six months ahead.
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Turning to service sector labor markets, job reductions continued, although average wage growth strengthened across the board.
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Price growth slowed somewhat at retail establishments and ticked up at non-retail services firms, raising overall price growth slightly.
Around The Dial – August 25
Economic policy reports, blog postings, and media stories of interest:
- CBPP updates information about state budget shortfalls.
- Calculated Risk breaks down the disappointing new housing data.
- Ezra Klein’s Research Desk maps where high earners live.
- The PBS NewsHour reports on the new “Race to the Top” winners.
Manufacturing in The South Atlantic: August
From the Federal Reserve Bank of Richmond’s latest survey of manufacturing activity in the South Atlantic (District of Columbia, Maryland, North Carolina, South Carolina, Virginia and West Virginia):
Manufacturing activity in the central Atlantic region advanced for the seventh consecutive month in August, but at a more modest pace than a month earlier, according to the Richmond Fed’s latest survey. All broad indicators — shipments, new orders and employment — continued to grow but at a rate below July’s pace. Other indicators were mixed, however. Capacity utilization grew nearly on par with last month, while growth in backlogs flatlined. Vendor delivery times grew at a slightly quicker rate and manufacturers reported somewhat faster growth in finished goods inventories.
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Looking ahead, assessments of business prospects for the next six months were less optimistic in August. Survey contacts anticipated slower growth in shipments, new orders, capacity utilization, and capital expenditures and expected declines in backlogs and vendor lead time.
Debating Itemized Deductions
A new report from the Institute on Taxation and Economic Policy argues that states should reform the ways in which they use itemized tax deductions. Notes the report:
Each of the itemized deductions allowed by states are frequently defended as an important means of offsetting large household expenses that reduce a family’s ability to pay taxes. But because low-income families rarely have potentially deductible expenses that exceed the basic standard deduction amount, the ability to itemize offers little or no tax cuts to fixed-income families. And, because itemized deductions are structured as deductions from taxable income, they typically provide much larger tax breaks to the best-off families than to middle-income taxpayers. This is because the tax cut you get from an itemized deduction depends on your federal income tax rate: imagine two New York families, each of which has $10,000 in mortgage interest payments that they include in their itemized deductions. If the first family is a middle income family paying at the 15 percent federal tax rate, the most they can expect is a $1,500 federal tax cut from this deduction ($10,000 times 15 percent). But if the second family is much wealthier and pays at the 35 percent top rate, they could expect a tax cut of up to $3,500 from this deduction, even though they spent exactly the same amount on mortgage interest as the first family. It is unlikely that a lawmaker would ever propose a direct spending program designed to make home-ownership more affordable that excluded low income families entirely and gave the biggest subsidies to the richest families—yet that is the inexorable impact of itemized deductions.
Around The Dial – August 24
Economic policy reports, blog postings, and media stories of interest:
- The Wall Street Journal reports on the sell-off of municipal assets.
- The New York Times considers the end of the real estate “gold rush.”
- Economist’s View wants the Federal Reserve to take a position.
- Calculated Risk asks how the consensus housing forecast can be so high.
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