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KNOXVILLE — Tennessee can expect modest growth through the first quarter of 2000, even though economic indicators fell slightly in September, a University of Tennessee economist said Wednesday.

“Despite September’s news of a decline in the leading index, the outlook for the state’s economy remains positive,” said Dr. Matt Murray, economist in UT’s Center for Business and Economic Research.

“Since September 1998, the index has indicated an expansion in nine of 12 months. Nonagricultural employment has grown, and employment levels on the whole are encouraging. I expect the state to experience modest but continued expansion through the first quarter of 2000,” Murray said.

Declines in taxable sales, average weekly manufacturing hours and a setback in the U.S. leading index led to a drop of 0.5 percent in the state’s overall rating, Murray said.

“Adjusted for inflation, the largest decline was 31.7 percent in taxable sales,” he said. “Average weekly manufacturing hours went down by 10.6 percent, and the U.S. leading index slipped 1.1 percent, its first drop since April of 1999.”

Murray said Memphis and Chattanooga grew at 5.0 and 2.8 percent respectively. Knoxville’s index declined 11.9 percent, while Nashville dropped 4.5 percent and the Tri-Cities 4.2 percent.

The seasonally-adjusted index is based on the most recent monthly data available. 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 using various indicators that are reliable in forecasting economic conditions in six to nine months.