UT Index Sees Modest Economic Growth

KNOXVILLE — Indicators of how the state economy will fare over the next six to nine months took a slight downturn in August, but not enough to signal future economic problems, the University of Tennessee’s monthly economic index says.

“The Tennessee economy is going to continue to grow modestly,” said Dr. Matthew Murray of UT’s Center for Business and Economic Research, which prepares the Tennessee index.

“Based on the lead indicators, the chances of a downturn are zero.”

The decline in the index came after two months of growth.

The seasonally-adjusted index is based on the most recent monthly data available, Murray said. It uses the U.S. index of leading economic indicators, initial claims for state unemployment insurance, average weekly manufacturing hours for the month, inflation-adjusted taxable sales, and construction employment totals.

UT economists developed the index by looking at various indicators and determining what economic conditions followed six to nine months later. They found that these five indicators are the best predictors of the state’s short-term economic performance, Murray said.

“We’ve found that if the indicators go down for three to four months in a row, that’s a general signal that we may be approaching an economic downturn in the next few months.

“If we see three to four months of growth, there’s the potential for a booming economy,” he said.

The August dip was initiated by an increase in unemployment claims and a 1.1 percent drop in the U.S. index.

Murray said the state continues to experience weakness in the manufacturing sector, despite overall strength in personal income, business expansion and job growth.

The index shows that the next six months look rosiest for the state’s major urban areas.

Chattanooga, with a 17.2 percent increase in its leading index for August, led the metropolitan statistical areas. The Tri-Cities — Bristol, Kingsport and Johnson City posted a 4.4 percent increase in the index. Nashville and Knoxville registered 1.1 percent increases.

Only in Memphis did the indicators show a downturn, dropping 0.9 percent.