Thursday, December 8, 2022

An uncertain economic future, national trends points to downturn in near future

Economists are expecting a turndown in the economy after 9 years of upward trends (Port City Daily photo/FILE)
Economists are expecting a turndown in the economy after 9 years of upward trends (Port City Daily photo/FILE)

WILMINGTON — Tracking trends in the economy to predict the future is not always an exact science. But, past patterns can be an indicator to what lies ahead for the City of Wilmington, as well as the entire country.

For Wilmington, local trends for both sales tax and property tax revenues have been increasing for the past several years – but city staff is preparing for the potential reverse in this trend.

“As you can see the property and sales tax are trending upwards, we are going to be very cautious as we watch this because we believe the economy is going to be shifting downward in the next few years,” Budget Director Laura Mortell told City Council last week during a budget workshop.

Sales tax is the second highest revenue source for Wilmington, but it is a very volatile tax that is difficult to predict since it is directly related to consumer confidence, she said.

Where does Wilmington get its money? Find out here

According to Mortell, The State of North Carolina said tax revenues for the first quarter have been below targeted goals since sales and corporate income tax were down.

So far, the City of Wilmington has received sales tax for two months, July and August. July revenues were above last year’s amount, and August was below.

“If you look at the total we are still trending upward, but we are not trending as fast as we thought we would. The first quarter of any given year is really not a great indicator for us of how we are going to end,” she said.

It is also important to keep in mind that the city continues to receive sales tax revenues after the fiscal year closes, with about a three-month delay from collection dates until distribution from the state.

One of the possible reasons for the decline in sales tax revenues is the increase of online shopping, this is an item the city has been working toward changing on the state and federal level.

“The majority of people are shopping online, and when you shop online you don’t pay those sales taxes that you would have paid if you would have gone into a store locally … its one of the things we have asked for in our federal legislative agenda and we’ve been rebuffed on that,” Mayor Bill Saffo said.

Forecasting for the future

While forecasting is not always the most accurate, over a period of time economic cycles develop a pattern. The average cycle last about seven years; the current cycle the state of the economy is in is going on nine years.

A cycle is determined by tracking the civilian unemployment rate and comparing it to time between recessions in the economy, Mortell said.

“The average recession is 6.87 years, were currently in our ninth year. This is where everyone goes, ‘we’ve been growing for nine years, the average over the last 45 years is 6.87, we only have two other data points that have reached 10, maybe were going to go into unprecedented times’ … current economists are saying were slowing more than what we had projected,” she said.

While on the larger scale economists are preparing for a downturn, regional economists are predicting that Wilmington will fare better than the state, as well as the country as a whole, Mortell said.


Michael Praats can be reached at Michael.p@localvoicemedia.com

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