More Growth Seen in Service Economy : Commerce: Manufacturing sector expected to lag, but most industries will gain at a slow pace, Commerce Department says.

The evolution of the U.S. service economy is expected to continue at the start of the 1990s, with growth in services probably outpacing the manufacturing sector, the Commerce Department said today.

In its annual industrial outlook, the department said it expects continued but slower growth for most U.S. industries in 1990.

“The coming year should mark the eighth straight year that industry shipments have risen,” said J. Michael Farren, undersecretary for international trade.

Although the overall industry outlook calls for continued but slower growth, the department said the service industry, led by information and health care businesses, is expected to outperform the manufacturing sector.

While it is difficult to make direct comparisons with the manufacturing sector, Farren said, “In general, the service industries should grow more quickly.”

More companies are expected to contract out for services, rather than perform them in-house, Farren said. The growth of information-related businesses--companies that collect, process and communicate data--should be strong next year.

“Much of the growth in information industries is fueled not simply by the need to process more information but by the development of new technology, which provides new capabilities and creates new demand,” Farren said.

Health care expenditures are forecast to grow by more than 10% next year, despite efforts by both the government and industry to curb spiraling health care costs.

Growth in the manufacturing sector, which includes 193 industries, is forecast to slow to 2% next year from 2.2% this year. Much of the downturn is attributed to a stalling auto industry and a slowdown in the construction of hotels and office buildings.

Medical and dental equipment industries and the makers of footwear are expected to lead the growth in manufacturing. Growth also is forecast for the wood products and paper industries.

Farren said 1990 is projected to be another year of declining sales for the auto industry, with sales forecast down 100,000 units from the previous year, when sales slipped by 600,000 units.

“Our analysts see little change in import penetration in the coming year, though the European luxury imports should continue to lose market share to the Japanese,” Farren said.

While new car sales are expected to slow, the auto parts business is forecast to grow primarily from an increased demand for exported parts.

The computer industry, although forecast to grow “at a reasonably good rate” next year, is not expected to do as well as it has in the past, Farren said. Commerce analysts predict a shift away from demand for mainframe machines in favor of personal computers and work stations.

Housing starts, which declined by 90,000 units this year, are expected to be flat.

A 3% decline is forecast for the value of commercial real estate, which has seen unprecedented levels of activity since 1983 and is suffering record vacancy rates.