Contract construction once again reported double-digit growth with a 12.8 percent increase. Likewise, all industries in this sector reported double-digit gains except plumbing and heating contractors which was down 2.7 percent. Overall, construction gains, including heavy construction, reflected strong year-to-year growth.
Manufacturing was up 7.8 percent, not as strong as second quarter's 12.4 percent but good growth when you consider that two major industries in this sector reported year-to-year declines. Both food products, and lumber and wood products were down 3.2 percent and 3.4 percent, respectively. The primary metals industry, over $1 billion in gross income for the quarter, was up 9.9 percent. Machinery (except electric machinery) was up 12.6 percent with over $800 million in gross income. However, the high achiever award in the manufacturing sector once again goes to the transportation equipment industry with a 22.7 percent increase.
Transportation and allied services was up 1.3 percent; however, as in the second quarter, the increase in this sector was understated because of the reclassification of a business from air transportation (which accounted for the loss in that industry) to an industry classification outside of the transportation sector. In other transportation industries, motor freight and warehousing was up 3.3 percent, railroads 17.9 percent and water transportation 10.4 percent.
The communication and utilities sector was up 7.7 percent with a 7 percent increase in communication (television, telephone, radio and cable services), water services was up 7.5 percent and other utilities (sanitary, irrigation, etc.) was up 10.3 percent. The 13 percent increase for electric companies, and the nearly 54 percent decline for gas companies, was due to reporting changes and industry reclassifications for a number of companies. Overall, the combined electric and gas company industries were up 6.5 percent.
Wholesale trade improved upon its 6.7 percent gain in second quarter with an 8.4 percent increase in third quarter. Much of this improvement was due to nondurable goods gross income which, while down on a year-to-year basis (0.2 percent), was considerably less than the 3.3 percent decline for nondurable goods in second quarter. Continued weakness in paper products, farm-product raw materials and wholesale petroleum products was largely responsible for the decline in nondurable goods. Durable goods, however, reported strong growth with a 16 percent increase due to significant gains in motor vehicles and auto equipment, home furnishings, and continued strong performance in sporting and recreational equipment.
The retail trade sector was up 7.9 percent, slightly better than the 7.4 percent increase in second quarter. One of the major growth categories in recent years, building materials and hardware, was up 6.4 percent with the sub-category lumber and building materials up 9.4 percent. General merchandise was up 5.9 percent. The largest retail industry, automotive dealers and gas stations, was up 5.8 percent over last year and much stronger than the 3.6 percent increase in second quarter. Apparel and accessories was up 7.4 percent and strong growth continued in furniture and furnishings with a 22.4 percent increase. Eating and drinking establishments continued its best year-to-year gains since 1994 with a 5.7 percent gain which was comparable to the 6 percent gain in First Quarter, 1997 and a 5.9 percent gain in second quarter.
Finance, insurance and real estate was up by a huge 35.2 percent over last year led by a 44.9 percent gain in finance. Most of the increase in finance was in the banking industry. However, all other categories in this sector reported substantial gains, insurance was up 15.7 percent and real estate 18.5 percent.
The service sector reported a year-to-year increase of 8.9 percent, outperforming second quarter's 8.4 percent increase. Hotels, motels was up 6.9 percent, business services 10.1 percent, automotive repair services 8.5 percent, and medical and health services 9.3 percent. Legal services was up 5.6 percent, somewhat less than in recent past quarters.
Gross income continued its near record growth during third quarter. All major sectors except mining and quarrying, and transportation services showed strong growth. Wholesale and retail sectors indicated continued consumer demand for durable goods, and discretionary spending for industries such as eating and drinking establishments continued a rate of growth not seen since 1994.