Business Indicators - December 2000

Business Indicators

by R. Keith Schwer

A strong U.S. economy, though showing signs of slower growth, seems to be moving toward what seems to be a sustainable path. Gross Domestic Product (GDP), a measure of overall spending, increased at 7.73 percent for the third quarter of 2000 over the same period a year ago. The early estimate of the third quarter GDP growth rate adjusted for price increases came in at 2.7 percent for the third quarter, a drop from 5.6 percent in the second quarter. This deceleration largely reflects declines in inventory adjustments, nonresidential fixed investments, and government spending.

The U.S. expansion continues to fuel growth in Nevada. And, as such, unemployment rates have reached the lowest levels since the 1960s. For August, Nevada reported a 3.9 percent unemployment rate, slightly higher for Las Vegas (4.2 percent) and slightly lower for Reno (2.7 percent). The benefits of the longest U.S. economic expansion on record have spread across the Silver State.

Gross gaming revenue for August 2000 increased 6.72 percent over the year-ago level, primarily driven by the strength of the Las Vegas tourism market. Las Vegas, coming to the end of the current wave of room expansions, has experienced revenue growth rates reflective of overall U.S. economic health, as well as increased visitor volume reflective of the acceptance of the large capacity expansion of the Las Vegas Strip.

The inflation picture remains less favorable than in past years. Energy prices contributed significantly to a 3.45 annualized percent increase in the current Consumer Price Index (CPI). The CPI, excluding energy and food prices, increased at a 2.6 percent rate over last year. Energy prices are up 15.4 percent from levels a year ago, and they remain a concern.

Housing, another area in which some slowing has occurred, remains generally weak in response to higher interest rates. U.S. housing starts are down 6 percent since last year. Mortgage rates for September, however, were on average below 8 percent, having declined from the steady levels above 8 percent for the past summer.

All in all, consumer confidence as measured in surveys remains high, though having declined slightly over the past few months, and leading economic indicators foretell that the future outlook remains bright.