New data for state GDP was released today by the Bureau of Economic Analysis. Arkansas GDP was reported to have declined at an annual rate of 3.0% in the second quarter compared to a more modest rate of decline of 0.6% for the United States. Arkansas GDP was previously reported to have declined in the first quarter of 2022 as well, but that statistic has been revised to show a growth rate of +6.5%. Arkansas’ second quarter decline was among the largest in the nation, exceeded only by Indiana (-3.3%), Connecticut (-4.7%), and Wyoming (-4.8%). Overall, GDP decreased in 40 states plus the District of Columbia.
Not only were the data for 2022:Q1 revised, but today’s release also included revisions back to 2017:Q1. The revisions increased the cumulative level of Arkansas GDP considerably: as of the first quarter, revised GDP was 3.9% higher than previously-reported estimates. The largest revisions were for 2020:Q1 (just before the pandemic-related downturn) and the revision for the first quarter of 2022.
With the upward revision to the path for Arkansas GDP, the state’s output shows even more indication of recovery since the pandemic recession. Cumulative growth from 2019:Q4 stood at 6.5% for Arkansas, compared to 3.5% for the U.S.
Breaking down the sources of the second quarter decline in GDP, we see that Construction, Manufacturing and Wholesale trade were substantial negative components for both Arkansas and the U.S. Nationally, Agriculture was a weak sector, although the positive contribution of agriculture to Arkansas GDP was substantial. The weakest sector for Arkansas, accounting for over three-quarters of the overall decline, was Management of Companies and Enterprises. It’s not clear how to account for this factor, but we can note that the second quarter decline represented a partial offset of a sharp upward spike in the first quarter.
One other interesting piece of information that can be gleaned from the GDP report regards inflation. GDP is reported for both nominal (dollar-value) and real (inflation-adjusted) measures. The ratio between the two defines an implicit price index for GDP. The chart below shows year-over-year changes for the implicit price index for private-sector GDP. It suggests that there was less disinflation in Arkansas than the rest of the country in 2020, and a higher rate of price increases since than. From 2021:Q2 to 2022:Q2, this measure of inflation was 9.7% for Arkansas compared to 8.2% for the U.S.
The data showing larger price increases for Arkansas GDP than for the U.S. could indicate the obvious conclusion: that inflation is running higher here in Arkansas. On the other hand, if the BEA’s price adjustments are overstating Arkansas inflation, then real GDP growth could be understated. There is certainly enough uncertainty about future data revisions to not rule out the latter possibility.