Quarterly Business Review

(July, August, September 1999)

Third Quarter, 1999 gross income was up 8.5 percent and represents the strongest increase of any quarter this year. Second Quarter was up 6.9 percent and 1st Quarter 8.3 percent. Leading 3rd Quarter growth was the finance, insurance, and real estate sector with a 19.9 percent increase, followed by the retail trade sector at 11.1 percent.

By sector, contract construction weighed in with an 8.4 percent increase, slightly below 2nd Quarter’s 10.5 percent gain. Heavy construction (primarily highways) was nearly flat over the previous year with only a 0.7 percent increase. Special trade contractors (plumbing, heating, electrical, etc.) carried the construction sector with a 10.3 percent increase.

Manufacturing was up 6.7 percent in 3rd Quarter, less than the 11.8 percent gain in 2nd Quarter. However, some industries within manufacturing reported their largest year-to-year gains so far this year in 3rd Quarter. Furniture and fixtures was up by nearly one-third with a 32.5 percent gain, and petroleum refining was up 68.4 percent. Much of the gain in petroleum refining was due to higher gross income, but part of this increase was also due to SIC changes. Food products, down 1.2 percent in 2nd Quarter, posted a 0.7 percent increase this quarter. The largest industry within the manufacturing sector, transportation equipment, was up 6.2 percent. Some of the wild year-to-year percentage swings within the transportation sector were due to SIC changes for some accounts.

Transportation and allied services was up 7.6 percent with railroads posting an 11.3 percent increase, local and suburban transit up 15.9 percent, and water transportation up 24.4 percent. Air transportation services was up 4.2 percent with motor freight and warehousing, the largest industry in this sector, up only 2.3 percent.

The communication and utilities sector was up 10.9 percent overall with the two major utilities reporting double-digit percentage increases -- these were communication, up 16.5 percent, and electric companies (which includes most natural gas sales), up 18.7 percent.

Wholesale trade showed renewed strength in 3rd Quarter with a 9.7 percent gain after a rather dismal 2nd Quarter increase of only 1.2 percent. The strong gain in 3rd Quarter was due to sharply higher growth in both durable and nondurable wholesale goods. Leading gainers in wholesale durable goods were motor vehicles and auto equipment up 11 percent and lumber and construction materials up 11.5 percent. Nondurable wholesale goods reported a 13.5 percent gain, considerably above the 0.3 percent gain in 2nd Quarter. The gain in nondurables was due to strong growth in drugs and sundries, a turnaround in farm-product raw materials -- up 8.7 percent after many quarters of negatives, and a 42.9 percent increase for petroleum and petroleum products on sharply higher petroleum prices.

Retail trade gains continued apace in 3rd Quarter with an 11.1 percent increase. Automotive dealers and gas stations reported a 16.7 percent increase, lumber and building materials was up 13.7 percent, and apparel and accessories up 7.3 percent. Eating and drinking establishments improved upon their strong growth of 2nd Quarter with a 9.3 percent increase this quarter. Miscellaneous retailing again showed strong growth with a 35.2 percent increase that was the result of non-store retailers (mail order and Internet) that nearly doubled their gross income from the previous year. The 4.8 percent decline in food stores was due mainly to a reclassification of some grocery stores (SIC 541) which accounted for the 6.2 percent decline for grocery stores. The nearly 60 percent increase for service stations was due to both SIC reclassifications and sharply higher fuel prices.

Finance, insurance, and real estate was up 19.9 percent this quarter, compared to only 5.5 percent in 2nd Quarter. The largest industry, finance, was up 27.5 percent, insurance 5.6 percent, and real estate 8.8 percent.

Services and other business doubled its 2nd Quarter increase of 1.1 percent to 2.2 percent this quarter. However, this sector continues to be heavily impacted by a substantial decline in reported gross income from computer services, which was down 22.3 percent from last year. The decline in computer services resulted in the largest industry in this sector, business services, reporting a 9.1 percent decline. Substantial strength was shown in other service sector industries: amusement and entertainment services was up11.8 percent, legal services up 11.8 percent, and other services (professional services) up 9.8 percent. The large gains in miscellaneous services (SIC 76) and other business (SIC 00,99) were due to temporary assignments of SIC for some accounts and do not indicate actual changes in gross income.

Overall, gross income gains in 3rd Quarter were stronger than 2nd Quarter. Substantial increases in wholesale industries and continued strength in retailing offset more moderate growth in construction and manufacturing. Of special significance in the retail trade sector was the 9.3 percent gain for eating and drinking establishments. Financial services was especially strong with a nearly 20 percent increase, and only a drop in computer services kept the service sector from a strong year-to-year gain.