Continuing growth seen in state economy, but at a slower pace

Wednesday, Nov. 1, 2000 | 10:57 a.m.

Conflicting indicators

Manufacturing activity in the United States declined for the third straight month, an industry group said today, yet another indication the U.S. economy is continuing to cool down.

The National Association of Purchasing Managers said its production index fell to 48.3 percent in October, slightly worse than the 49.9 percent level recorded in September. The NAPM index uses 50 percent as a break-even point, with anything above signaling economic growth and anything below indicating contraction.

But in another report, the Commerce Department said construction spending jumped 2.4 percent in September, the biggest gain in 10 months, led by strong increases in spending for home remodeling, offices and government projects.

CARSON CITY -- Nevada's economy is expected to stay strong, assisted in part by the economic recovery in Japan, but growth will follow a national trend and slow somewhat, financial analysts say.

The Economic Forum -- five people active in Nevada's private sector who assess the state's immediate economic prospects in order to predict state tax revenue -- listened Tuesday as experts analyzed the state economy through the 2003 fiscal year.

Gov. Kenny Guinn must build his budget based on the projections of the Economic Forum.

In preliminary forecasts Tuesday, the forum predicted the state will receive $672 million next fiscal year from sales taxes. That's above the $670.2 million forecast by the state Budget Division but below the $677.6 million estimated by the Legislative Fiscal Analyst's Office.

The forum, whose chairman is Leo Seevers of Reno, also predicted the state would collect $620 million from the gaming tax next year. That's above the $608.4 million forecasts by the Legislative Fiscal Division but below the $626.3 million of the Budget Office.

The gaming and sales taxes are the two biggest revenue producers for the state.

The forum returns Nov. 30 to make its final predictions.

State Budget Director Perry Comeaux will use the preliminary figures to begin building the spending program for the 2002 and 2003 fiscal years.

Comeaux said the preliminary forecasts are "very, very close" to what Guinn had begun building his budget on.

Two years ago, agencies asked for $900 million more than was available. The governor told the departments to take their budgets for this year and double them for the coming two years. He said he will then decide what enhancements will be financed. Comeaux said the agency requests are still $300 million over the expected revenues.

Jim Diffley, vice president of WEFA Inc., a national firm that forecasts the economy, said the world economy will be healthy during the next two years. But he said growth in the United States will taper off from 5.3 percent this year to 3.6 percent next year. And inflation will rise from 2.9 percent last year to 3.3 percent this year but fall to 2.5 percent next year.

Talking about Nevada, Diffley said the growth of jobs, 4.2 percent this year, will slow to 3.4 percent next year and than 3.1 percent in 2002. Income growth, which rose 8.1 percent in Nevada this year, will fall to 6.3 percent next year and 5.7 percent the following year, he predicted. He also predicted housing starts will increase from 30,300 this year to 34,200 next year and 35,100 units the following year.

The economy in Japan, which has been "in a deep and protracted recession," is recovering, he said.

Frank Streshley, a senior research analyst for the state Gaming Control Board, said Las Vegas is attracting more visitors from the Pacific Rim.

Those who come from Japan, Streshley said, are "upper end" players who "stay longer and have larger pocketbooks."

Streshley said it is hard to predict the impact on Nevada of Indian gambling in California, He estimated Indians would be operating 50,000 slot machines by year's end. And he noted estimates of 115,000 machines over the next few years.

He said he figured Indian gambling into the slowdown of growth in Nevada's gaming taxes.