Md. economy rolling along quite steadily It may cool a bit in rest of year, but not catch flu

'A good head of steam'

Home sales strong

jobs plentiful

no signs of inflation

September 13, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Don't expect the Maryland economy to provide a stock market-type roller-coaster ride.

While the Dow Jones industrial average soars and plunges by hundreds of points, the state's economy continues its steady -- though flattening -- climb.

With a solid second quarter behind it, the Maryland economy will cool for the rest of the year but not suffer a severe downturn from foreign currency crises in Asia and Russia, economists said.

"I think we'll probably end up slowing down a little bit just like the national economy," said Patrick Bradley, senior vice president of Mercantile-Safe Deposit & Trust Co.

"But I don't think the state of Maryland has tremendous exposure to those parts of the world that are experiencing

economic difficulty. And Maryland's economy, like the nation's, has a good head of steam."

Home sales in the second quarter rose, with those in the metropolitan area 59 percent higher than last year's second quarter.

The labor shortage appeared to continue, with a slight increase in jobs, record-high help wanted advertising and unemployment below 5 percent.

Consumer spending pulled back a bit, with sales-tax collections for purchases of apparel, furniture and general merchandise falling 8 percent from the comparable period a year earlier.

Economists generally expect slower growth in the second half of the year than in the first, but they do not anticipate the kind of recession that some associate with a bear market.

"The day after the 500-point drop, business was very brisk," said Robert Russel, president of R&H Motor Cars LLC, whose five dealerships sell Mercedes, BMW, Toyota, Subaru, Mazda and Volkswagen cars.

Sales of cars -- big ticket purchases that reflect confidence in the economy -- were strong in the second quarter, with 94,885 new cars were sold in Maryland, 2.96 percent more than in the comparable period last year.

"Most of the dealers I've spoken to have weathered the GM strike pretty well," said Peter Kitzmiller, the president of the the Maryland New Car and Truck Dealers Association. "And just about everybody I've spoken to says sales are pretty strong."

Among key indicators of Maryland's economy during the second quarter:

Sales of existing homes shot up 26 percent statewide, to 15,883 from 12,565 a year earlier. The increase in the Baltimore area home sales was 59 percent, to 8,264 from 5,206.

Contracts for new home construction fell 7 percent, to $684 million from $737 million. Nonresidential construction contracts rose 34 percent, to $620.6 million from $462.5 million.

L Bankruptcies jumped 15 percent, to 9,197 filings from 8,025.

Employment rose 1 percent, to 2.286 million from 2.257 million a year earlier, according to the Bureau of Labor Statistics. Baltimore employment fell 2.2 percent, to 291,000 in June 1998, from 297,700 a year earlier.

Unemployment stood at 4.8 percent in June, down from 5.6 percent a year earlier. The jobless rate in the Baltimore area was 5.6 percent, down from 5.7 percent. Help-wanted ads surpassed 1.6 million lines in the second quarter, up 10 percent from the year-earlier period.

Sales tax collections rose 4 percent, to $531.4 million from $513.2 million a year earlier. Sales taxes received on construction goods rose about 10 percent, to $67.1 million from $60.9 million, but those received on furniture and general merchandise fell to $169.7 million, an 8 percent drop from $184.8 million in the comparable period last year.

Traffic through Baltimore-Washington International Airport increased 6 percent, to almost 4 million passengers from about 3.8 million in the comparable period a year earlier. Hotel and motel room tax collections rose 19 percent, to almost $7.5 million from $6.3 million a year earlier.

"The first half of 1998 has been good for the state," said Mike Funk, an economist with the Regional Economic Studies Institute at Towson University.

"We've had employment growth in excess of 2 percent on an annualized rate. We saw consumers go on a spending spree. We've had the best two back-to-back headquarters we've seen in the residential real estate market.

"And there are no signs of inflation at all," Funk said, adding that a cut in interest rates is now far more likely than an increase.

"I'm expecting the Federal Reserve Board to hold the line."

Compared with the nation as a whole, Maryland's economy appears to be growing more slowly. Mark Zandi, an economist with Regional Financial Associates outside Philadelphia, puts job growth in Maryland at between 1 percent and 1.5 percent, about a full point below the national rate. He said income growth is about 5.5 percent, compared with 6 percent nationwide.

Consumers have been spending much of their money on homes. "Since January of 1998, the market has been gangbusters," said Gil Marsiglia, president of the Greater Baltimore Board of Realtors.

"Are we going to keep up the momentum? My feeling is we'll start to see it slow up a little bit."

He said the world economic conditions could affect the market.

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