Conventional wisdom holds that Washington state will be insulated from the worst of the national economic slow-down, if not completely isolated from it. Strong employment growth in the Puget Sound tech and aerospace sectors; a boom in commercial real estate construction in Seattle, Bellevue, Spokane and Yakima; and strong prices for eastern Washington farm products should keep the state's economy relatively strong - or so the thinking goes.

And if you look at the numbers, it's clear that farm counties east of the Cascades are booming. But it's also clear that the national slowdown did indeed reach the urban parts of the state during the third quarter of last year. The slow-down isn't recessionary - retail sales continued to grow - but the rate of growth in Q3 of '07 was markedly slower than what we'd see in previous years.

Overall, state taxable retail sales increased 5.9 percent in the third quarter, to $31.1 billion. That's solid growth. In fact, many of eastern Washington's smaller counties were booming last fall, as farmers began spending some of their income from record wheat and hay prices. Grant County (Moses Lake) recorded a 38-percent jump in total retail activity compared to third-quarter 2006; Lincoln County (Davenport) saw sales up 30 percent. The biggest wheat-producing county, Whitman (Colfax), saw a 17-percent increase.

How did they spend their windfall? Much of it was reinvested in operations. Grant County figures show sales of farm equipment and supplies up more than 60 percent, while auto sales totals (i.e., pick-ups) went up nearly 22 percent. Farm families also spent a little something on the home: Home furnishings and electronics sales jumped nearly 27 percent. And at least a few people splurged on luxury goods: jewelry and luggage store sales were up 28.4 percent.

But on a statewide basis, the Q3 '07 figures also show the growth in retail activity is slowing down from the previous two years. Between 2004 and 2005, third-quarter sales grew 10.2 percent, and between '05 and '06, the rate was 8.8 percent. That means the growth rate has slowed 42 percent over the past two years.

The slowdown is worst in the state's urban counties: Clark County (Vancouver) registered a 0.5-percent drop in retail activity in Q3 '07, while growth in both Thurston (Olympia) and Whatcom (Bellingham) counties was less than 1 percent. Snohomish (Everett) and Spokane counties continued to hum with about 5 percent growth, but both were down significantly. (Snohomish had gained more than 13 percent the year before.) The Tri-Cities were the only metro area to record double-digit growth in 2007, with Benton County (Richland, Kennewick) up 11.4 percent, and Franklin (Pasco) up 9.2.

King County accounts for about a third of the state's retail activity. Its third-quarter growth rate of 7.8 percent was unchanged from the year before. But, as we noted elsewhere, much of the increase was due to gains in taxable services; sales of actual retail goods grew only 1.9 percent year-over-year.