Virginia’s financial position continues to improve after COVID-19’s impacts in 2020, but the fast-paced recovery seen earlier in the year is slowing, Secretary of Finance Joe Flores told legislators in an update on Monday and Tuesday.
“The bottom line is that we’ve hit a few roadblocks in the past month or so with the resurgence of the virus, especially the Delta variant, and some supply chain issues. But you’re going to see from this report, as you mentioned Madam Chair, that the current revenue performance continues to just chug along. We’re doing actually very well, and it’s suggestive of a recovering economy,” Flores told the Senate Finance and Appropriations Committee on Tuesday.
In his report, Flores highlighted some national and Virginia-focused economic indicators.
“It’s actually a mixed bag. We did have, as I mentioned to you the last couple of times, very strong growth in the first two quarters,” he told the House Appropriations Committee on Monday. “It looks like the third quarter has been revised downward, or will be, until we’re looking at one-and-a-half to two percent growth.”
Supply chain issues and the resurgence of COVID-19 also caused decreased employment growth, but unemployment and unemployment claims fell. Flores said Virginia hasn’t quite reached healthy levels of unemployment.
One index of economic indicators published by the conference board grew ahead of expectations in August, but the Conference Board also reports declining consumer confidence.
“Not surprisingly with the resurgence of the virus as well as supply chain issues and rising gas prices, you can see consumer confidence take a hit,” Flores said.
He also reported that inflation is rising slightly when compared to last year. Flores highlighted a takeaway from meetings with the Joint Advisory Board of Economists: “There was an unusual level of consensus, I think, in terms of the outlook, I think what most folks are seeing is a potential slowdown for the latter part of this calendar year, with expected growth in calendar year 2022.”
Delegate Delores McQuinn (D-Richmond) asked if consumers might stop spending due to inflation and other rising costs even if the supply chain recovers.
“All I hear is we’re talking about how costly everything is. Do we project that the spending will continue as it is, or can we expect people to push back and say, ‘I don’t want to afford this,’ or ‘I can’t afford this,'” she said.
Flores replied, “You are seeing rising salaries and wages, so people can afford more. Americans are sitting on a lot of cash that they didn’t spend during the pandemic in different areas. What that means going forward as far as consumer behavior is a great question and they pay people a lot more than I to figure out what people may or may not do. But in terms of gas, grocery store, you’re absolutely right: prices are up. And people are going to have to make choices about what they can afford and what they cannot afford.”
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