Real time withholding tax collections slumped badly in August after skyrocketing in July. The growth rate is now back to the lowest levels of the past year. As of September 1, the annual rate of change was +1% in actual, nominal terms versus the corresponding period a year ago. That would be a negative number in real terms, although we cannot be sure how much because of the uncertainty of the wage inflation adjustment. The current rate is down from a nosebleed territory +11% a month before and from +2.9% three months ago.
The August slowing appears to be within the normal short term cycle of tax collections which typically runs 3-4 months. That cycle should bottom this month. A break below current levels would signal a probable recession.
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Excise taxes declined 1.5% year over year in August. The -1.5% year to year decline compares with -4.5% in July. This continues a string of declines (or narrow gains) which have suggested that the economy entered recession this year. Excise taxes are based on unit volume, not prices. Therefore they may be an accurate gauge of economic activity independent of any need to adjust for inflation.
The latest weekly data from the EIA on gasoline consumption, as of August 26 shows a 0.8% year to year gain in gas sales, which supports the conclusion that August was not a strong month for the US economy.
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