I did some looking at sales tax revenues. I went back to July of 2009 and stopped the graph at December 2015. I will have a separate post looking at the circumstances after that date with the revision of the forecast and what happened then. These data come from the state OMB Rev-E-News publication released monthly.
This is going to get a bit more technical than many of my other posts. However, I am a big believer that there is no reason to shy away from complexity, particularly when avoiding it sacrifices accuracy. So we are going to discuss forecast performance for sales tax in North Dakota. There are many different ways to evaluate forecasts and the one I will use here is called a tracking signal.
I’ve been saying this for a while now, but I am happy to see somebody else discussing the issue. This Bloomberg article makes excellent points about the issues for North Dakota and several other states experiencing revenue shortfalls.
I resisted writing anything specific about Brexit and North Dakota for a time now. Part of the issue was it was all too soon; natural experiments of this scale are not something economists expect to just fall in their lap. There were many questions about the implications of the event for North Dakota, which as we will see is probably minimal in terms of direct relevance. With the benefit of a little temporal distance we can address this in a manner devoid of (some of) the immediate hysteria.
So the BEA release (follow this link to the data) this week revealed a large decline in North Dakota GDP from 2014 to 2015. Not a real surprise. As a minor note, I prefer to use the quarterly data instead of the annual data, not because it tells a very different story, but there are some distinctions. That is what I will be using in this discussion. I am also looking at the real GDP data to control for inflation changes over this time.