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KNOXVILLE — Tennessee’s economic growth rate in 2000 was less than 1 percent over 1999 despite strong growth in December, a University of Tennessee report says.

The state’s index of leading economic indicators increased 4.5 percent in December, but Tennessee’s economic growth rate for the year was only 0.7 percent over 1999.

The index, which uses data from the recent past to project economic condition 6-9 months in the future, declined in seven months of 2000. Employment growth increased 2.1 percent on the year and taxable sales grew only 0.9 percent.

UT economist Matt Murray said normal, healthy taxable sales growth is 4-5 percent.

“The performance of Tennessee’s leading index over the year 2000 reveals a healthy but struggling economy marked by dwindling construction jobs and shrinking taxable sales,” Murray said.

Murray forecasts continued slow growth for the state’s economy despite a national slowdown and the recent stock market slide.

“Overall, the state’s economy remains strong,” Murray said. “While a severe contraction does not appear imminent, expectations for the statewide economy in the short-term remain guarded.”

Tennessee’s December index reports taxable sales jumped 31 percent to $5.9 billion, after a 30 percent drop the month before.

Other positive index components were unemployment insurance claims, which dropped nearly 100 percent to 32,209, and construction employment, which expanded 5.8 percent.

A 14.9 percent drop in manufacturing hours in December and a 6.4 percent drop in the U.S. leading index, which fell to its lowest level of the year, weakened the state’s economic outlook.

Also, despite the drop in initial unemployment claims, Tennessee’s unemployment rate rose one-tenth of a percentage point to 4.3 percent.

December economic growth expanded in the state’s largest cities except Nashville, which fell 1 percent. Increases were Memphis, 8.7 percent; Chattanooga, 6.4; Knoxville, 6.0; and Tri-Cities, 2.2.

The Tennessee monthly index of economic indicators is compiled by UT’s Center for Business and Economic Research.