The U.S. economy continued to expand at a modest pace during the final quarter of 1985 (Table 1). Real GNP growth exceeded the minimal gains recorded in the first half of the year but was well below the 1984 pace. A key element in this improved performance was a slowly reviving manufacturing sector. Evidence of the sector's growing strength can be found in the improving Industrial Production Index.

     A number of interrelated forces, the most important of which were rapidly declining oil prices, a surge in stock prices, a weakening of the dollar and lower interest rates, acted to speed up the national economy. Rising stock prices and lower automobile financing rates combined to give the debt burdened consumer sector a boost.

     The Consumer Price Index continued to rise at a modest pace. However, a slight in­crease in the inflation rate was detectable from fourth quarter data. Economists anticipate that mild increases in the rate of inflation will continue. The primary reasons for this view are a rapidly expanding money supply (12.0% in 1985). faster economic growth and rising import prices. The major moderating factor throughout the expansion has been wages. Wage increases are likely to continue as a force restricting the rate of inflation. Falling world oil prices will also keep the rate of inflation far below double digit levels.

     Economic activity in the Central Wisconsin region during the fourth quarter showed little improvement over a year ago. Unemployment rates for all three counties improved modestly when compared with the December 1984 upwardly revised levels. The regional unemployment rate now stands at 8.0%. However, there has been a slight reduction in the number of jobs. Total employment slipped .8% below the December 1984 figure.

     Total employment and the unemployment rate are the two broadest gauges of regional economic activity available in the short run. Although the unemployment rate is slightly lower than one year ago, the absence of job creation is a clear signal of minimal regional economic growth. Analyzing state unemployment and employment data yields a similar finding.

     Regional employment figures show some modest gains in the manufacturing, govern­ment and construction sectors. The manufacturing gains are encouraging but probably over­stated. An inexplicably large payroll jump in the food processing industry pushed the manufacturing employment estimate 4.8% above the December 1984 level. The sector's actual job increase is more likely half that figure. More revealing data comes from the region's trade and service sectors. No net job creation has occurred in either sector. Trade employment shows no change while service payrolls are 1.7% below the December 1984 level. These two sectors are fairly reliable indicators of current conditions.

     The only real bright spot among the regional indicators is the business confidence index. After dipping below 50 earlier in the year, the index for current local conditions rose to 59 in the fourth quarter. Business executives appear to be growing more confident about local conditions. This bodes well for 1986.

     The Stevens Point area continues to report stronger numbers than neighboring local economies. However, fourth quarter gains in economic activity were modest at best. Cer­tainly the number of area jobs is greater than the fourth quarter 1984 level but the precise magnitude is difficult to determine. Portage County is the source of the previously men­tioned questionable food processing employment estimates. However, smaller but more credible gains were reported in a number of local manufacturing industries. It is for this reason that Portage County has the lowest unemployment rate in the region and was alone among Central Wisconsin Counties reporting higher employment than one year ago.

     The rest of the local indicators reveal an economy with little movement in either direction. Help wanted advertising rose slightly and the initial unemployment claims total dropped 5.9% below the year earlier figure. Severe weather reduced fourth quarter con­struction activity despite lower interest rates.

     Only two local indicators demonstrated sharp movement and each moved in an opposite direction. Public assistance claims shot well above the previous year and third quarter levels. Slower growth is clearly having an impact on some segments of the local economy. On the positive side, bank loan activity surged in the fourth quarter. Bank loans rose 3.5% during the quarter raising total loans to 8.1 % above the fourth quarter 1984 level.

     The Central Wisconsin economy showed little evidence of improvement during the fourth quarter. Regional employment is virtually unchanged from a year earlier. Gains in manufacturing, employment, business confidence and bank loan activity suggest that economic conditions will improve in the first half of 1986.