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Trend of business.


The United States Economy

The Department of Commerce states that the annual growth rate of real Gross National Product (GNP) in the third quarter of 1989 was 2.7 percent, an increase of 0.2 percent from the second quarter of this year. According to the Sioux Falls Argus Leader, economists are forecasting slower economic growth, resulting in slower real GNP growth in the next year. This may in part be due to the Federal Reserve Board's anti-inflation campaign. Blue Chip Economic Indicators predicts real GNP growth of 1.7 percent in 1990.

Disposable personal income rose 8.4 percent in the third quarter compared to a year ago. The rate of personal savings declined 0.3 percent from 5.3 percent in the second quarter of 1989 to 5.0 percent in the third quarter. Personal savings in the third quarter was 5.1 percent of disposable personal income, compared to 5.4 percent last quarter and 4.3 percent in the same quarter last year. This decline in personal savings may be due to the larger than normal increase in personal consumption expenditures.

Unemployment in the United States fell slightly this quarter, to 5.2 percent down from 5.3 percent last quarter. The AFL-CIO News issue of November 13, 1989, stated that the weak manufacturing sector activity has kept the unemployment rate at its current level, despite employment gains in the local government and service sectors. This decline in manufacturing employment is accompanied by a decline in the output of goods. The industrial production has declined for the first time in three years.

The Index of Leading Indicators has been steadily increasing. It rose 0.5 percent in August and 1.0 percent in September compared to the same period a year ago. In October, the Index of Leading Indicators declined 0.4 percent from the previous month.

Inflation as measured by the Consumer Price Index (CPI) slowed in the third quarter, increasing only 4.7 percent from this period a year ago.

South Dakota's Economy

Standing at 3.1 percent in the third quarter of 1989, South Dakota's seasonally adjusted unemployment rate is at its lowest point in over ten years. This unemployment rate is 1.1 percent lower than last quarter's 4.2 percent rate, and 1.4 percent lower than the 4.5 percent recorded in the same quarter last year. South Dakota's unemployment rate remains well below the national rate.

Seasonally adjusted third quarter non-agricultural employment continues to rise slightly, increasing 0.2 percent since last quarter. After posting an increase of nearly 1 percent since the same period last year, seasonally adjusted non-agricultural employment has reached its highest point in over twelve years. The South Dakota Econometric Model (see page 8) predicts slight increases in both total employment and nonagricultural employment for 1990.

The September issue of the South Dakota Labor Bulletin projects that farming will suffer the greatest decline in employment in the next decade. Contributing to this decline are high operating costs and increased mechanization resulting in the need for fewer workers. The three areas with greatest expected growth are retail salespersons, registered nurses, and waiters/waitresses. The outlook through the year 2000 is for greatest growth occurring in the health services industry. The average number of hours worked a week in private employment increased from 34.1 in September 1988 to 34.4 in September 1989. Average hourly earnings in private employment rose from $7.34 to $7.64 in the same time period.

In the construction industry, employment levels are also up. The employment level in the construction industry rose 3.7 percent from last quarter and is 2.6 percent higher than the same period last year. On a seasonally adjusted basis, construction employment is also at its highest level in nearly two years.

Personal income dropped slightly in the second quarter of 1989. The 1.8 percent decline in personal income reflects, in part, the 16.3 percent decrease in farm income since the first quarter of the year. Farm income is up 23.6 percent from the second quarter in 1988. Personal income has increased 3.0 percent in the same time period. As shown in the South Dakota Econometric Model (page 8), personal income is predicted to decrease slightly in 1990, while farm income is expected to fall dramatically. It is anticipated that the United States as a whole will follow this pattern.

New truck registrations have risen significantly, reaching an all time peak in the third quarter of 1989. Seasonally adjusted, the sales of new trucks has rebounded dramatically from last quarter's slight decline, increasing 40.6 percent. New car sales, seasonally adjusted, also posted a hefty increase, rising 23.0 percent since last quarter. This is their highest point in three years. Compared to the third quarter in 1988, seasonally adjusted new car and truck sales have increased 21.9 percent and 32.0 percent, respectively.

Taxable sales continued strong, recording an 8.7 percent increase in the July-August bimonthly period compared to the same period in 1988. Areas of growth for this period were in general merchandise sales - up 12 percent, eating and drinking sales - up 6 percent, services - up 12 percent, construction - up 27 percent, and finance, insurance and real estate - up 68 percent.
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Author:Johnson, Toni
Publication:South Dakota Business Review
Date:Dec 1, 1989
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