The Maine Business Index continues its consistent and relatively strong upward trend. The services and manufacturing sectors advanced significantly. Construction numbers also pushed higher in the first part of the year, although they now appear to be weakening. Gas pipeline projects and the BIW facility expansion will undoubtedly add some vigor to the construction sector over the coming year. The retail sector has been robust and our forecast calls for continued improvement. Caution may be appropriate, however. Much of the growth in retail sales has come at the expense of personal savings. In fact, the national personal savings rate fell to a record low of 0.6% in the second quarter of 1998. Much of this decline can be explained by the "wealth effect," which holds that as the value of one's assets (for example, stocks and mutual funds) increase consumers will spend a greater portion of their income. With consumer debt growing, however, one may question how long this spending spree can continue. And if consumer spending slows down, the economy in general will follow.
Maine exhibits a very favorable unemployment picture, perhaps too much so. The unemployment rate has fallen below 4.0% and now lies considerably below the national rate. The problem is that such low figures mean that new and expanding firms have trouble finding workers, and they may have to put their expansion plans on hold until the labor supply picture slackens. This is especially true in southern Maine, where the unemployment rate in both York and Cumberland counties has dropped below 2.5%. Population growth could provide workers, but such growth is quite meager in Maine. In 1997 the population of the state increased by only about 3,000 people, not all of whom were workers. Forecasts of Maine's population growth suggest that this slow trend will continue.
Total personal income (TPI) figures for 1997 have recently been revised, and the picture for Maine shows some promise. Over the past several years Maine's TPI has grown more slowly than has the national average. In 1997, for example, the annual growth rate was 5.0%, while the nation's rate was 5.6%. The good news is that this difference is less than it was in the 1993-1995 period. The major source of the increase in personal income was transfer payments. For 1997 the growth rate in earnings and dividends, interest, and rent stood well below the national average.
Additionally, since Maine's population grew at a rate less than that of the national average, the growth in per capita personal income (PCPI) was not as slow. For 1997 the PCPI growth rate for Maine was 4.7%, the same as the nation's. Unfortunately Maine still ranks 36th in PCPI, at about 87% of the national average.
So, what can we expect? National pundits are predicting a limited recession in 1999 due primarily to economic events outside the United States. Undoubtedly we will feel the impact, but probably to a lesser extent. Therefore, I believe that we will stay our modest but consistent course.
R.C.M.
Business Forecast Systems
68 Leonard Street
Belmont, MA 02178
Tel.: 617-484-5050
http://www.forecastpro.com
1997 |
1998 |
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1987 = 100 |
Raw DataUnits |
Assigned Weights |
APR |
MAY |
JUN |
APR |
MAY |
JUN |
MAINE BUSINESS INDEX(Composite) |
114.8 |
115.2 |
111.0 |
119.1 |
118.6 |
120.5 |
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Truck freight on Turnpike <1> |
(tons) |
2.0% |
158.9 |
156.3 |
157.5 |
169.7 |
154.8 |
164.6 |
Automobiles on Turnpike <1> |
(number) |
26.9% |
131.1 |
131.8 |
132.7 |
138.6 |
135.8 |
136.3 |
Construction employment <2> |
(workers) |
6.6% |
79.9 |
80.7 |
81.7 |
81.4 |
81.5 |
81.9 |
Manufacturing production <2> |
(hours) |
20.6% |
108.6 |
108.5 |
109.0 |
111.2 |
112.4 |
111.9 |
Fish landings <3> |
(pounds) |
0.6% |
181.3 |
141.2 |
181.8 |
156.8 |
147.4 |
157.9 |
Electricity sales <4> |
(kwh) |
3.2% |
108.8 |
111.3 |
107.9 |
112.4 |
102.8 |
108.0 |
Agricultural sales <5> |
(1982 $) |
1.3% |
90.8 |
90.6 |
97.6 |
111.9 |
106.5 |
97.4 |
Hotel and motel receipts <6> |
(1982-84 $) |
1.0% |
111.3 |
124.7 |
112.4 |
125.3 |
142.7 |
111.9 |
State government expenditures <6> |
(1987 $) |
13.0% |
119.5 |
124.1 |
97.0 |
118.5 |
122.8 |
144.1 |
Retail sales, less motel receiptS <6> |
(1982-84 $) |
18.3% |
100.9 |
99.0 |
92.4 |
106.5 |
106.6 |
101.5 |
F.I.R.E. <7> |
(1987 $) |
6.5% |
120.7 |
121.0 |
121.4 |
123.2 |
123.4 |
123.8 |
SOURCES: <1> Maine Turnpike Authority; <2> Maine Department of Labor; <3> National Marine Fisheries Service; <4> Central Maine Power Company; <5> U.S. Department of Agriculture; <6> Maine Department of Finance and Administration; <7> U.S. Department of Commerce. |
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