Quarterly Business Review
4th Quarter, 1998

Fourth Quarter, 1998 gross income was up 5.8 percent over Fourth Quarter, 1997 and represented the strongest year-to-year growth for any quarter during calendar 1998. Leading this increase was the manufacturing sector with an 18.5 percent year-to-year gain, and the finance, insurance, and real estate sector, up 11.6 percent. However, the overall gain in gross income during fourth quarter was tempered somewhat by a decline in reported gross income for the service sector, and wholesale trade. Lower demand and falling product prices have impacted a number of wholesale nondurable goods industries.

By sector, contract construction reported a 5.7 percent increase, somewhat below increases in recent past quarters and the result of a nominal 1.7 percent increase for heavy construction. The largest industry within this sector, general building contractors, was up 7.1 percent. Special trade contractors was up 5.8 percent and, within special trade contractors, masonry contractors was up 12.6 percent.

Manufacturing was up 18.5 percent in fourth quarter, nearly double the increase in third quarter and comparable to the 18.4 percent increase in Fourth Quarter, 1997. This increase was largely the result of a 44.5 percent increase in transportation equipment. Other industries within this sector reported a mixed bag of gross income activity. Manufacturing of food products was essentially flat from last year, apparel and textiles was down 10.5 percent, and lumber and wood products was down 11.9 percent. On the other hand, paper and allied products posted a modest 2.2 percent increase after a string of declines in recent quarters. Furniture and fixtures continued strong growth with a 20.3 percent increase, as did machinery (except electric), up 12.9 percent. Overall, the manufacturing sector strength was the result of a number of key industries.

Transportation and allied services was up 4 percent overall with the largest industry, motor freight and warehousing, up 5.1 percent. Local and suburban transit was up over 50 percent and air transportation was up 23.1 percent. Railroads reported a decline of 1.1 percent and water transportation was down 3.6 percent.

Communication and utilities was up 6.6 percent overall,with an individual increase of nearly 20 percent on a year-to-year basis for electric companies. Water companies reported a 9.3 percent increase. Communication, the largest industry in the sector, was up 3.6 percent. The category, other utilities (sewage, refuse, steam, irrigation), was down 5.5 percent.

Wholesale trade relinquished its perennial lead as the sector with the highest gross income to the manufacturing sector this quarter because of a 2.8 percent decline. This decline was almost entirely due to sharp declines in the wholesale nondurable goods sector for paper and paper products, farm product raw materials, and petroleum and petroleum products. For the most part, these declines were due to lower consumer demand for these products and the consequent reduction in reported gross income. Farm product raw materials was especially hard hit from lower demand and falling product prices and reported a 72.4 percent decline in gross income. Petroleum products gross income was down due to lower product pricing.

Nondurable wholesale gross income was up 3.8 percent as a result of strong increase in industries such as motor vehicles and auto equipment, up 9.3 percent, electrical goods 11.5 percent, and hardware, plumbing, heating supplies up 7.5 percent. On the down side, however, were lumber and construction supplies, down 3 percent, and wholesale machinery and equipment, down 6.3 percent.

Retail trade was up 6.3 percent with all major retail industries reporting gains except apparel and accessories, which was down 3.2 percent. Among those industries which reported an increase was food stores which reported a marginal increase of 0.2 percent. The food stores increase was largely the result of a more than doubling of reported gross income for independent bakeries, up from $43 million in Fourth Quarter, 1997 to $96 million in Fourth Quarter, 1998. Automotive dealers (new and used) was up 8.8 percent and automotive accessory dealers was up 38.5 percent. Furniture and furnishings continued strong growth with a 13.8 percent increase. Eating and drinking establishments posted a 4.1 percent increase.

Finance, insurance and real estate was up 11.6 percent overall with the gross income leader in this sector, finance, up 8.4 percent. All industries in this sector reported substantial gains, insurance was up 11.4 percent, and real estate was up 17.2 percent. The category, other finance, was up 48.5 percent, which includes holding companies and other investment offices.

The service and other business sector was down 0.4 percent largely as a result of a sharp (38.7 percent) decline in computer services. Exclusive of computer services, the overall increase for this sector would be about 7.5 percent. The primary strength in the service sector this quarter was in medical and health services, up 6 percent, and professional services (not legal services) such as engineers, architects, accounting/bookkeeping, and management services, up 12 percent.

In summary, Fourth Quarter, 1998 posted the strongest year-to-year growth of any quarter this year. This growth occurred in spite of weakness in some manufacturing industries, wholesale nondurable goods, and computer services within the service sector. Underlying strength in key manufacturing industries, construction activity, and wholesale and retail sales of motor vehicles, and furniture and furnishings were the main drivers in this growth.