Business activity in Utah declined during 1987 for the third consecutive year, according to a report from the Utah Foundation, a private research organization.
According to the annual analysis of business activity in the state, sales volume (measured by sales and use tax receipts) dropped by 1.5 percent last year. In addition, the purchasing power of the dollar was down by 3.6 percent. When an adjustment is made for inflation, the total reduction in the effective sales volume amounted to 5.0 percent in 1987.In contrast to Utah, personal consumption expenditures throughout the United States rose by 6 percent last year. Even after an allowance is made for inflation, personal consumption expenditures were up by 1.9 percent in 1987.
The foundation said this clearly indicates that business activity in Utah lagged behind that of the nation as a whole.
Foundation analysts point out, however, that there are some recent signs that Utah's economy may be improving.
Although business activity was down for the year as a whole, it was up by 1.2 percent in the fourth quarter of 1987. Furthermore, unemployment in the state has declined and personal income has continued to grow.
Total sales volume in Utah during 1987 was $12.2 billion. This was equal to about 65 percent of the total personal income of the state for the year. In 1978, sales volume was equal to nearly 80 percent of personal income. In other words, Utahns currently are spending a much smaller proportion of their personal income on taxable items than they did in the late 1970s. More of their income is probably now going to meet other obligations - interest payments, taxes, housing costs, medical payments, repayment of debt, etc. - that are not subject to the sales and use tax, according to the Foundation.
The report shows that between 1970 and 1978, Utah business activity climbed by 78 percent, or an average 7.5 percent per year after an adjustment for inflation. Positive economic growth was recorded in each of these eight years. Between 1978 and 1987, on the other hand, adjusted business activity in Utah declined by 4.8 percent. Negative economic growth was registered in six of these nine years.
The strong economic showing by Utah during the 1970s was mainly due to rising energy prices and expansion in Utah energy production. The weak Utah economy during recent years, on the other hand, is largely a reflection of weak energy prices and reduced energy production, according to the foundation analysts.
This slowdown in business activity has greatly complicated the problems facing state and local governments in Utah. The sales tax is a major source of revenue for the state as well as for many Utah cities. Last year, the state trimmed back on expenditure authorizations and enacted the largest tax increase in the state's history in order to keep the state budget in balance. Many local governments also were confronted with severe financial problems at the local level.