The latest report on state GDP from the Bureau of Economic Analysis shows Arkansas growth rate in the fourth quarter was 1.5% (seasonally adjusted annual rate), well below the U.S. growth rate of 2.2%. Benefiting from strong growth in oil and gas production, the fastest growing state was Texas at 6.6%. Arkansas ranked as the 34th highest growth rate among the 50 states.
The fourth-quarter total for Arkansas was up 1.2% from a year earlier, compared to a year-over-year growth rate of 3.0% for the U.S. Over the most recent five years, Arkansas GDP growth has averaged 0.9% while the U.S. growth rate has averaged 2.4%.
As is often the case, data revisions that came out with today’s report (for 2015 through 2018:Q3) are important for putting the most recent data into context. For Arkansas, these revisions raised estimates of GDP growth in late 2016 and early 2017, but lowered growth estimates for more recent quarters.
Specifically, the revisions increased growth in the fourth quarter of 2016 from 3.3% to 4.3%, changed the first quarter of 2017 from negative to essentially zero, and raised the second quarter estimate as well (from 1.5% to 2.1%). From 2017:Q4 forward, however, estimates of Arkansas GDP growth were all lowered. A notable revision for 2018:Q2 reduced the state’s growth rate from 4.4% down to 1.7%.
The table below shows a breakdown of contributions to growth by sector. The largest single contributor to Arkansas’ growth rate in the fourth quarter was wholesale trade, but durable goods manufacturing had a strong showing as well. Both are relatively large, important sectors in the Arkansas economy. Other growing sectors included Real Estate; Management of companies and enterprises; and Health care and social assistance. Oil and gas production also gave the Arkansas economy a boost, but that sector is not as large a contributor to our state’s economy as it is to other states in the region.
One notable declining sector was Agriculture, which was down 8.7% from the previous quarter. The contrast between this downturn in production and the surge in farm income that we saw in the fourth-quarter personal income report would seem to indicate that the income surge in agriculture was largely attributable to payments made to farmers as part of the USDA’s Market Facilitation Program, which is intended to assist farmers affected by tariffs and reduced exports. Payments under this program began in the fourth quarter. The USDA has recently noted that the program has paid out more than $8.3 billion to nearly 600,000 applicants. Payments to soybean farmers have comprised a large share of the payouts, and should continue to boost farm incomes in the income data for the first quarter of 2019.