Tuesday, July 07, 2009

Springfield Area Economy expects below normal levels of activity through 2009

The University of Illinois at Springfield announces that the greater Springfield Enterprise Index (SEI) for April 2009 is 58 which means below normal economic activity, and much slower than one year ago (April 2008). A SEI value of 100 indicates that the area economy is on its long-term growth trend. A SEI value less than 100 indicates “below average” activity.

The Springfield area economy is projected to be below normal growth throughout the year. The SEI increases to 69 for April 2010. While this may not indicate a rebound in the economy it does project no further slowing by the end of the year.

“Compared to previous SEI forecasts, this is the first time we have seen a major slowing of the area economy,” said Patty Byrnes, professor of economics at the University of Illinois at Springfield. “This is related to recent declines in local area employment and expected little improvement in the state and national economies.”

The indexes for all other areas of Illinois also are predicted to be below normal growth for that area. The Springfield SEI shows a similar pattern of activity to all other metropolitan areas with no foreseen further worsening of the each area’s economy. The Chicago area SEI shows expected below normal activity throughout 2009.

What is the SEI?
The SEI is a leading indicator of the local area status of the business cycle. This means that it helps predict the trend in the local economy. It can be used by business leaders and government workers to understand profits, job prospects and tax revenues. The SEI is interpreted by first remembering that overtime the Springfield area economy has grown, despite ups and downs of the level of economic activity. The index measures how far away the economy is from this and growth trend. A value of 100 implies that the Springfield area economy is on its long-term growth trend. An SEI value greater than 100 indicates “above average” and values below 100 indicate “below average” growth.

How is the SEI Constructed?
The SEI measures the economy based on national and local factors. The national component is from the national business cycle using the Chicago Federal Reserve Bank National Activity Index (CFNAI), which is a composite of many indicator including output and income, employment and unemployment, consumption, housing starts and sales, manufacturing and trade sales, and inventories and orders. The local business cycle component is represented by non-farm employment in four sectors, manufacturing, construction, retail, and other sectors (including government). The sectors are based on the local employment activities and Midwest manufacturing activities estimated from the Chicago Fed Midwest Manufacturing Index (CFMMI).

How Can I Learn More?
The index was developed and created by the Regional Economic Applications Laboratory, Institute of Government and Public Affairs, University of Illinois. Information on the Springfield area index can be obtained from Patty Byrnes, Center for State Policy and Leadership at UIS, 217-206-7783 or pbyrn1@uis.edu. The Greater Springfield Enterprise Index is due to collaboration between The Greater Springfield Chamber of Commerce, the Institute of Government and Public Affairs – University of Illinois, and the Center for State Policy and Leadership – University of Illinois at Springfield.

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