Latest Arkansas Revenue Report Shows Continued Above Forecast Growth
Arkansas’ economy continues to outperform its forecasts, according to the most recent revenue report.
The December revenue report, released Tuesday by the Department of Finance and Administration, shows the state’s net available general revenue totaled $530.3 million for December, which is 7.3% above forecast, but $17.2 million or -3.1% below last year’s amount.
Michael Pakko with the Arkansas Economic Development Institute says one area of the economy that continues to see success is in sales and use tax collections. The December amount of sales and use tax collections totaled $229.7 million.
"Sales and use tax collections continue to be stronger than we had anticipated largely due to some of the stimulus programs that help to keep purchasing power in people’s hands and allow them to continue to spend," Pakko said. "So that’s been something of a surprise. Consumer spending has boosted sales and use tax collections. They were about 2.1% ahead of last year, which was about 2.3% above forecast."
Because the numbers reflect purchases from November, around half of the holiday shopping season is accounted in the latest report, with the rest to appear in next month’s report.
Pakko said one possible explanation for the increase in sales and use collection could be on how Arkansans are choosing to spend their money in the middle of a pandemic.
"What we’ve found is that people are spending less on things that are obviously restricted like dining out, other forms of entertainment, going to the movies, the theater, things like that. But people are spending more on groceries, on food made at home, spending more on home improvement supplies and a number of other categories," Pakko said.
Despite the ongoing recession and continued unemployment holding back the economy, Pakko says that consumer confidence has not been impacted the way it normally would be by a recession, with Arkansans still spending as opposed to holding onto their earnings.
While the long-term economic impacts of the pandemic are yet to be seen, Pakko thinks some changes that have already occurred could continue even when the pandemic ends.
"We’ve seen a huge increase in shopping online, that’s likely to persist. We’ve seen more people depending on working from home, remote access to the workplace. Those kind of things that were really accelerations of trends that existed before are likely to continue and that will be reflected in different patterns of spending," Pakko said.
Pakko said that another economic consequence of the pandemic is the possible closure of small businesses hit by the pandemic, leading to a different kind of competitive landscape in certain industries. However, he said there has also been a surge in franchise taxes.
"It reflects what we’ve been seeing in some of the data, which is a big increase in the number of new businesses being formed…small proprietorships I guess, people looking for new business opportunities in the midst of the pandemic," Pakko said.
Concerning the unemployment numbers, Pakko says he does not expect unemployment to approach pre-pandemic levels until 2022 at the very earliest.