PROVIDENCE – The Rhode Island economic recovery from the impacts of the COVID-19 pandemic accelerated in earnest in July.
The state’s current conditions index value for the month was 100, its highest possible value, according to University of Rhode Island economist Leonard Lardaro, who noted that the state’s economy had been ramping up speed in the three months prior to July in his CCI report released Wednesday.
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“The good news is that the June Current Conditions Index was revised higher from 83 to 92,” Lardaro said. “The better news is that for July, the CCI attained its maximum possible value of 100, as all twelve indicators improved relative to their values last year.”
Lardaro also noted that most indicator values in July 2020 were quite low, and were therefore easy to have improved upon, with the exception of the state’s retails sales and manufacturing wage.
The overall CCI value for Rhode Island was 17 one year prior. A value above 50 indicates expansion, while a value below 50 indicates contraction.
Even so, all 12 indicators that comprise the CCI improved year over year, including gains in the manufacturing wage and retail sales, as well as total manufacturing hours, employment service jobs, single-unit permits, consumer sentiment and others.
“These values do not signify that Rhode Island’s economy has returned to its pre-pandemic level,” Lardaro noted. “The CCI reflects cyclical momentum. So, the recent values show that the recovery we are now in has been gaining momentum with July signifying we now have the petal to the metal.”
Lardaro said that if each CCI indicator is viewed as a leg our economy can stand on, since April our state’s economic momentum has been solidifying and the recovery has become more broadly based as we are standing on more and more legs. In another analogy, for July, Rhode Island’s economy was clicking on all cylinders.
The positive news was not without a caveat. Lardaro said the important question was what the state has done to reinvent itself during the pandemic and added that the “long-term outcome [of the state economy] will be determined by how the state allocates large sums of federal funds.” He noted that the state might use it for consumption-oriented purposes as it “all too often” does, rather than investment-oriented spending.
Lardaro also said he was uncertain that the economy will continue in a such a positive direction, in part citing the state’s business climate.
In addition, despite the year-to-year economic improvement, Lardaro said that the monthly CCI value was neutral at 50, with six of twelve indicators improving relative to June.
The monthly CCI value in the state seems to be fluctuating between 50 and 75, suggesting that the regular CCI, based on year-over-year changes, will eventually begin to weaken somewhat, but this is not entirely unexpected, Lardaro said.
“I expect this recovery for Rhode Island to be uneven,” said Lardaro. “Let’s hope our recent momentum can be sustained.”
Year-over-year CCI indicator performance in July:
- Government employment increased 2.7%
- U.S. consumer sentiment increased 12.2%
- Single-unit permits increased 18.4%
- Retail sales increased 12.8%
- Employment services jobs increased 6.3%
- Private service production employment increased 8.7%
- Total manufacturing hours increased 23.2%
- Manufacturing wage increased 10%
- Labor force increased 0.1%
- Benefit exhaustions declined 62.2%
- New claims declined 35.9%
- The unemployment rate declined 8.2 percentage points
