THE VIRGINIAN-PILOT 
              Copyright (c) 1996, Landmark Communications, Inc.

DATE: Friday, August 23, 1996               TAG: 9608230077
SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 
SOURCE: BY LON WAGNER, STAFF WRITER 
                                            LENGTH:   46 lines

SAD SECOND HALF OF '96 IS FORECAST THE SERVICE SECTOR, WHICH DROVE GROWTH, IS DOWN FOR THE YEAR.

The Hampton Roads economy weakened during the past two months, and there are few signs on the horizon of a rebound by the end of the year, according to an economic report released Thursday.

``Things continue to look sad with the local economy,'' said David Garraty, economics professor at Virginia Wesleyan College. ``I am not at all confident that we'll do any better in the second half of the year.''

The Hampton Roads Economic Performance Index, a local economic model devised by Garraty, stalled at 105.2 in February, March and April.

Worse news came Thursday: the index dropped in May and dipped again, to 104.2, in June. The index measures the economy against the 1991-1993 time period, which was assigned a rating of 100.

The index this June was also lower than it was last June, when it stood at 104.8. That's the first time since January 1992 that a month didn't best its mark from the previous year. And in January 1992 the region's economy had just started pulling out of the recession of 1990-1991. ``I guess the biggest surprise was to see the service sector down for the year,'' Garraty said.

The service sector was not the only group of businesses to decline, but Garraty noted that services have been the driving force behind regional job growth.

Garraty constructs the index from seasonally adjusted employment data, which take into account the differences in earnings among various industries.

Six of the seven major industrial sectors in the region dropped from May to June. Four of seven were lower than they were in June 1995.

Manufacturing led the retreat in employment from May to June with a 13.8 percent decline, followed by construction (down 12.3 percent), services (down 6.6 percent), wholesale and retail trade (down 5.3 percent) and government (down 1.9 percent).

For those looking for a bright spot, there was only one: transportation. Utilities and communications grew 21.5 percent from May to June.

Overall, Garraty doesn't see much chance for a turnaround in the next couple of months.

``Around election time, a lot of people wait on the sideline to see what's going to happen,'' he said. ILLUSTRATION: Color graphic

KEYWORDS: ECONOMY by CNB