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Oct 17

Sales Tax Distribution Report & Advice

Posted on October 17, 2017 at 4:47 PM by Paige Worsham

October 2017
August 2017 Collections - October 2017 Distributions
Linda S. Millsaps

In October, North Carolina local governments are expected to receive $278.88 million in sales tax distributions, based on August 2017 sales. This is a $16.35 million decrease from the previous month, but is still substantially above collections compared to this time in 2015 and 2016.


The graph below makes it clear just how much monthly variance there can be in sales tax collections. As you will recall from the previous months, there was a marked decline in the rate of increase. At the time, based on conversations with the Department of Revenue, we speculated that the differences may have been at least partially attributable to some refund anomalies. An average of the last three months, 7.12% growth, is much more in line with expectations.


The Current Economic Situation

North Carolina's economic growth remains slow and steady, with a few small shifts. Housing permit issuances remain strong, with 6,730 new residential building permits offered in August, the newest data available. In addition, the Richmond Federal Reserve and CoreLogic report that home values have increased in every North Carolina MSA over the last year. Unemployment has continued to hold steady. While state level numbers for September are not yet available, August’s unemployment rate was the same as July’s at 4.1%. The most job growth occurred in the education and health services sectors. The greatest job losses took place in the government sector, with many local governments reportedly shedding jobs. Year over year data also suggests some substantial job losses in Information Technology.

Looking Ahead

Looking ahead, the forecast continues to look like about 2 percent annual growth for both 2017 and 2018. However, that growth may show a little more month to month variability as the impact of the very significant 2017 hurricane session works its way through the national economy. For example, Dr. Walden's Index of North Carolina Leading Economic Indicators shows some limited local retrenchment in the four to six month window. This appears to be primarily driven by losses in manufacturing hours and earnings.


As has been noted before, while manufacturing is certainly not as robust in North Carolina as it once was, we continue to have a larger portion of our state economy tied to manufacturing. As such, changes in this sector are felt throughout the state.

Interestingly, our export growth, which is primarily manufactured goods, is experiencing much greater increases then the nation as a whole.


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