The Economic and Revenue Forecast Council issued its monthly Economic & Revenue Update today. Here are the key takeaways:

With respect to the U.S. economy:

The economic recovery is tentatively holding on. There is uncertainty about the Japanese economy; there is tumult in the Middle East and gas prices have spiked . . . . If no agreement is reached [on raising the federal debt ceiling] and the United States defaults on its bonds, interest rates will rise and push the economy back into recession. . . . [Because of higher gas prices] consumer confidence is down, and consumer spending is starting to moderate. The housing market remains in the doldrums.

With respect to the Washington economy:

The Washington economy has continued to recover, but slowly and hesitantly. However, geopolitical developments and the Japanese earthquake and tsunami pose new threats to the recovery. . . . Even without these unfortunate foreign developments, the state’s economy faced considerable headwinds from slow job growth and a sluggish housing market. . . .

The devastation in Japan, from the earthquake, tsunami and the damage to the Fukushima Daiichi nuclear power plant is having a negative short-term effect on the State’s trade volumes. . . . there is anecdotal evidence that exports to Japan are backing up at Washington ports. The Japanese infrastructure is not able to receive these shipments. In the longer term, as Japan rebuilds, we expect our exports to that nation will recover.

. . . the Case-Shiller Home Price Index for Seattle has declined in each of the past eight months and is now 6.6% lower than a year ago. High vacancies are pushing down prices. Also new home construction in Washington is in competition with an increasing stream of foreclosures, so it is likely to stay weak for some time.

With respect to collections:

Major General Fund-State (GF-S) revenues for the March 11 – April 10, 2011 collection period were $5.1 million (0.6%) higher than our March forecast. Revenue Act collections came in $4.74 million above the forecast and non-Revenue Act collections were $0.31 million above the forecast. . . .

. . . During the period there was a $2.3 million refund that was not included in the
forecast. Without the refund, [Revenue Act] collections would have been $7.1 million (0.9%) above the forecast.

After one month, collections are on track with the March forecast. Considerable risks to the forecast remain in place, however, particularly with respect to higher gas prices, which may place a brake on consumer spending. With these risks, it remains critical that legislators include a healthy reserve in the budget they adopt for 2011-13.

The Update can be downloaded via this link.