I warned in my latest Federal Revenues Report that withholding tax collections had rebounded sharply in late July, to bring the 4 week average of biweekly collections to its biggest gain in several years. That gain reached double digits, something we have not seen since 2011. That report was based on daily data through August 1.
There had been some very weak readings prior to that. Consequently I couldn’t tell whether this was just a snapback to trend, or possibly a sign that the US economy was heading into a blowoff resulting from all the monetary stimulus it has received. That stimulus has been boosted lately as negative interest rates in Europe and Japan causes capital to flee those markets and head straight for the US.
In the Federal Revenue reports, I consider and analyze a variety of Federal Taxes which the US Treasury collects and reports in real time. It’s critical information because it gives us a heads up on how the lagging economic indicators will be reported in the following month.
The 4 week data on the withholding taxes showed the increase in withholding that the month end data could not, due to calendar anomalies. In July of this year, the last day on which taxes could be collected was Friday, July 29. In 2015, the last collection day in July was the 31st. That meant that the collection of taxes due from the last 2 days of July rolled over into August this year. Those collections did not show up in the July number. As a result the year to year change for the month of July was a decline of 1%. That’s how most observers who track this information reported it, and interpreted it.
This post was published at Wall Street Examiner by Lee Adler ‘ August 9, 2016.
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