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Quarterly GDP

The Bureau of Economic Analysis has released yet another “prototype” data set for state-level statistics.  Earlier this month we saw, for the first time, estimates of personal consumption spending by state.  Yesterday, the BEA introduced state-level statistics on quarterly GDP.  For some time, we have had estimates of annual GDP for states, but annual averages can only reveal so much about the short-term ups and downs that characterize an economy.  Access to quarterly estimates provides additional detail for assessing the economy’s dynamics.

The chart below compares quarterly growth rates for U.S. GDP with the new quarterly measure of Arkansas GDP.*  The quarter-to-quarter changes for Arkansas show more volatility than the national average.  This is partly due to statistical measurement issues, but also due to the fact that the U.S. average is naturally smoother as increases in one region tend to offset decreases in others.  Overall, as with other measures of economic activity, Arkansas economy has followed a trajectory similar to the U.S. as a whole.  The data also corroborate some previously established patterns:  Arkansas experienced a sharp recovery from the recession in late 2009 and early 2010, but then fell into a pattern of relatively sluggish growth.   There were even two episodes — late 2010 and mid 2012, where Arkansas experienced two consecutive quarters of negative output growth.  The pace of the expansion picked up in 2013, particularly early in the year.

Source:   Bureau of Economic Analysis*
Source: Bureau of Economic Analysis*

The most recent observations released as a part of the new prototype series were for the fourth quarter of 2013.  In Arkansas, fourth quarter GPD increased at a seasonally adjusted annual rate of 3.0% — slightly higher than the U.S. average of 2.8%.  Among the 50 states, Arkansas growth rate ranked #22.  As shown in the table below, growth was positive in most sectors.  Output in manufacturing — especially non-durable goods — showed particular strength.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

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Note:  Data used to generate historical growth rates use an interpolated estimate for the fourth quarter of 2007.  Payments associated with the purchase of Alltel Communications distort the quarterly personal income statistics which are used to calculate quarterly GDP estimates.  The adjusted GDP data is substituted to smooth out what would otherwise look like an excessive growth/contraction pattern at the end of 2007 and beginning of 2008.

Arkansas GDP in 2013

The Bureau of Economic Analysis announced this morning that Arkansas GDP growth in 2013 was 2.4%, up from a revised growth rate of 1.1% in 2012.  Arkansas’ growth rate was well above the national average of 1.8%, and ranked #16 among the 50 states. gsp_0614

Today’s report included a comprehensive set of revisions that affected the data going back to 1997. Although Arkansas’ growth rate in 2012 was revised downward, the revisions generally paint a picture of stronger long-term growth for the state.  As shown in the figure below, the immediate post-recession years of 2010 and 2011 saw much stronger growth than previously estimated.  Growth in 2003 through 2008 was also revised upward.  Cumulatively Arkansas GDP growth is now reported to have increased by 28.3% over the 10 years from 2002-2012, up from a previously-reported total of 16.5%.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

After the data revisions, Arkansas growth over the past several years is now estimated to have exceeded that of the U.S. as a whole.  The 2009 drop in output was previously estimated to have been smaller than the national average, but it is now reported to have been about the same (-2.7%).  Nevertheless, stronger growth in the decade before the recession — as well as in 2010 and 2013 — result in a significant cumulative improvement for Arkansas.  In per capita terms, Arkansas real GDP (in 2009 dollars) increased from $33,828 in 2003 to $39,111 in 2013 (an increase from 73.7% of the national average to 79.6%).

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

Over half of Arkansas’ growth in 2013 came from natural resource sectors:  Agriculture, forestry, fishing and hunting contributed over half of a percentage point to total growth and Mining accounted for more than a full percentage point.  The BEA news release noted that these sectors figured prominently in national growth patterns.  The Agriculture, etc. component contributed positively to growth in 49 states plus the District of Columbia.  Mining “was not a significant contributor to real GDP growth for the nation,” but it did boost the growth rates of some of the fastest growing states in the nation.  For example, mining accounted for 3.61 percentage points of North Dakota’s 9.7 percent growth.

Some sectors in Arkansas’ economy remain relatively weak, however.  Construction had a positive contribution to growth nationwide, but subtracted from growth in Arkansas.  Manufacturing in Arkansas showed essentially zero growth over the year, while it added 0.4% to the U.S. growth rate.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

Arkansas GDP Growth in 2012

Arkansas GDP grew only 1.3% in 2012, but revisions to prior years raised estimates by an additional 1.3%.

Preliminary statistics on state-level GDP show that Arkansas grew at a 1.3% rate last year.  According to the report from the Bureau of Economic Analysis, Arkansas’ growth rate was more than a percentage point lower than the national growth rate of 2.5%.  Among the 50 states plus D.C., Arkansas’ growth ranked #38. 

The table below shows the breakdown of GDP growth by sector, comparing Arkansas to the U.S. total.  A number of sectors in Arkansas grew faster than the national average, including Agriculture, forestry, fishing, and hunting; Utilities; and Management of companies and enterprises.  However, several of Arkansas sectors contracted, including Mining and several service-providing sectors.

Source: Bureau of Economic Analysis

In addition to individual-sector growth rates, the table also shows the contribution of each sector to total GDP growth.  The size of the contribution depends not only on its growth rate, but also on the relative importance of the sector in the overall economy.  So, for example, even though Mining contracted at a rate of 8.65%, it is a relatively small sector of the Arkansas economy (about 2%) so its contribution to lower total GDP growth by only 0.19%.

Manufacturing — amounting to over 14% of total GDP — is a far more important sector to the Arkansas economy.  Consequently, even though both durable and nondurable-goods manufacturing expanded last year, the fact that growth was lower than the national average accounted for much of the relatively slow growth in Arkansas’ economy.  If Manufacturing growth in Arkansas matched the national average, total Arkansas GDP growth would have been nearly one-half percentage point higher.

It is important to note that today’s data for 2012 are preliminary “advance statistics,” subject to future revision.  In fact, the revisions of data for 2009-2011 that were released today illustrate the importance of new information that becomes available over time.  As shown in the figure below, Arkansas growth rates were revised upward for each of the previous three years.  For example, growth in 2011 was originally reported at 0.34% but is now estimated to be nearly twice that rate (0.66%).  Even more significantly, the magnitude of the recessionary contraction in 2009 is now estimated to be much smaller than previously-published data suggested.

Source: Bureau of Economic Analysis

The cumulative effect of today’s revisions was to raise the estimated total of Arkansas real GDP by 1.3% as of 2011.  The 1.3% growth for 2012 comes on top of that upwardly-revised measure of economic activity in 2011.

Source: Bureau of Economic Analysis

Metro Area GDP for 2011

After a 5-month administrative delay, the U.S. Bureau of Economic Analysis has released new 2011 GDP data for the nation’s metropolitan areas.  The statistics are considered “advance statistics,” subject to considerable future revision.

Nationwide, real (inflation-adjusted) GDP increased in 242 of the nation’s 366 metro areas in 2011, with an overall metro-area growth rate of 1.6%.   Here in Arkansas, growth rates were positive for Hot Springs, Little Rock, Memphis and Texarkana.  The economies of Fort Smith, Jonesboro and Pine Bluff contracted from the previous year, while Northwest Arkansas saw real GDP unchanged from the previous year.  Even among the Arkansas metro areas that expanded, growth rates were generally below the national average (with only Little Rock matching the U.S. average).

The preliminary nature of the “advance” estimates leaves a great deal of uncertainty about the magnitude of the reported growth rates.  Along with current growth rates, the table below also shows revisions to the data from previous years.

Source: Bureau of Economic Analysis

In general, negative growth rates in 2009 were revised downward — indicating that the effects of the recession were more severe than previously reported.  The only Arkansas metro area with a positive growth rate in 2009 was Little Rock; but even this estimate was subject to a substantial downward revision.

In 2010, the newly-revised data generally show higher growth rates than the advance estimates published in September 2011.  Growth in the Fayetteville metro area, in particular, was marked up substantially.  At the other extreme, the new estimates show negative growth for Little Rock in 2010, compared to the small increase that was originally reported.

As demonstrated by the magnitude of the revisions for 2009 and 2010, it is quite likely that the 2011 growth rates will be revised considerably by the time the next metro area GDP report comes out this September.

State GDP in 2011

The Bureau of Economic Analysis released state-level GDP estimates for 2011 this morning.  The data show that Arkansas GDP grew at a relatively modest rate of 0.3% last year.  The comparable growth rate for the U.S. was 1.5%.  Arkansas’ growth rate ranked #39 in the nation.

The breakdown of growth rates by sector reveal a clear source of the relative weakness in Arkansas’ economy in 2011:  Agricultural output (including forestry, fishing and hunting) declined by over 16% last year.  The direct contribution to the state’s GDP growth was a reduction of nearly 0.5 percentage points.  In a state like Arkansas where agriculture comprises a relatively large share of economic activity, weakness in the agricultural sector generates secondary, induced effects in other areas of the economy.

Source: Bureau of Economic Analysis

Weather conditions in Arkansas during 2011 were suboptimal to say the least — spring storms and flooding, followed by summer heat and drought, were responsible for a sharp drop in farm incomes.  The good news is that weather is temporary, so the relative slowdown in Arkansas economic growth during 2011 is unlikely to be a persistent problem.

The new report also included revisions to state GDP figures for the previous four years.  As indicated in the chart below, the revised figures show that the recessionary downturn in 2009 was far larger than previously reported.  The revised figure of -2.9% is nearly twice as large as the estimate published last year (-1.5%).   On the other hand, the latest data show a sharper rebound in economic activity during 2010.  The new figures show an expansion of 2.5%, revised upward from the previously-reported rate of 2.3%.

Source: Bureau of Economic Analysis

Today’s GDP report is consistent with other sources of information (e.g. employment, personal income, taxable sales) that indicated a slowdown in the pace of the economic recovery in Arkansas last year.  These indicators have been showing noticeable improvement for the latter part of 2011 and the first part of 2012, suggesting that the GDP slowdown last year represented only a temporary setback.

Metro Area GDP – 2010

The Bureau of Economic Analysis released its “advance” estimates on metro area GDP for 2010 on Tuesday.  For all U.S. metropolitan areas combined, the report showed that real (inflation-adjusted) GDP increased by 2.5% in 2010 after declining 2.5% in 2009.  Increases were reported in 304 of the nation’s 366 Metropolitan Statistical Areas (MSAs).  As shown in the table below, each of Arkansas’ MSAs showed positive growth, with Fayetteville, Fort Smith, Jonesboro and Pine Bluff all showing growth in excess of the national average.  Little Rock was the slowest-growing MSA, but it was also the only metro area in the state to have experienced positive growth in 2009.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

The 2010 statistics are classified as “advance” statistics, meaning that they are preliminary and based on incomplete source data.  Only time will tell what subsequent revisions to the data will show.  Tuesday’s release included revisions to previous years’ data.  Each of Arkansas’ MSAs showed a downward revision compared to earlier-released estimates (see Metro Area GDP – 2009).

Arkansas Real GDP Growth – Revisions to the 2009 Data

A parenthetical statement in yesterday’s report on real GDP growth in Arkansas mentioned that the 2009 data had been revised downward.  Advance figures reported last November showed slightly positive growth for Arkansas in 2009, but revised figures reveal that the state’s economy contracted by 1.6% — better than most other states during the year that marked the low point of the recession, but far worse than the initial statistics had indicated. 

The table below shows contributions to growth for the sectoral components of Arkansas GDP growth in 2009, comparing the initial data released in November 2010 with the new data that came out yesterday.  The sharp downward revision was not attributable to any one component, but goods-producing sectors generally contributed the most to the downward revision.

Source:  Bureau of Labor Statistics (Calculations by the Institute for Economic Advancement)
Source: Bureau of Labor Statistics (Calculations by the Institute for Economic Advancement)

The total downward revision, from +0.6% to -1.5%, amounted to -2.1%.  More than half of that total is attributed to durable goods manufacturing, which appears to have fallen far more sharply at the end of the recession than initial figures suggested.  Significant contributions to the downward revision were also registered for Agriculture, Construction, and Utilities.   Transportation and warehousing, an important component of the Arkansas economy, also contributed to the decline.  Several other service-providing sectors expanded more robustly than the previous data had indicated — particularly Wholesale trade and Finance and insurance.

When the advance report on 2009 GDP came out last November, we reported that “the numbers for Arkansas were something of a surprise.”  Employment statistics had suggested a more severe downturn in overall economic activity, and the only reasonable explanation for the positive GDP growth was that growth had been concentrated in relatively low-employment sectors of Arkansas economy.  This still appears to be true.  The downward revisions for sectors that comprise large shares of the labor force — Manufacturing, Transportation and warehousing, and Government — show that the recession hit output as hard as it did employment.  In the smaller, but growing service-providing sectors, the revised statistics for output growth in 2009 show even more strength than the earlier data suggested.  To some extent, the newly-revised figures bring some consistency to our view of the recession’s impact on Arkansas’ economy.

Arkansas Real GDP – 2010

This morning, the U.S. Bureau of Economic Analysis released advance statistics on GDP by State for 2010.   The data show widespread economic recovery, with real GDP increasing in 48 states and the District of Columbia.  Arkansas real GDP expanded by 2.3%, slightly lower than the national average rate of 2.6%.   (Revised figures for the previous year show that Arkansas real GDP contracted at a 1.5% rate in 2009, in contrast to previously-published figures that indicated a small increase for the year – see Arkansas Gross Domestic Product – 2009.)

GDP by State 2010

The press release from BEA noted that durable-goods manufacturing was a leading contributor to growth in 29 states.  As shown in the table below, manufacturing of both durable and nondurables goods expanded sharply in Arkansas, rising at rates of 10% and 7.7%, respectively.  Service-providing sectors expanded in all sectors except the volatile category of information services (primarily telecommunications).  Construction continued to decline, as did Agriculture, forestry, fishing and hunting.  Following two years of rapid development in the Fayetteville shale play, mining activity contracted slightly in 2010.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

Growth rates for individual sectors can vary considerably over time, and from each other.  For relatively small sectors, these swings can convey an exaggerated sense of importance.  For example, Administrative and waste services expanded at a rate of over 9% in 2010.  However, this sector accounts for only 2.4% of total economic activity in Arkansas.  As a result, growth in Administrative and waste services contributed only a small portion to total Arkansas GDP growth–about 0.2 percentage points.  The table below shows growth contributions by sector, where the relative size of the sector is taken into account.

Source:  Bureau of Economic Analyisis
Source: Bureau of Economic Analyisis

Manufacturing accounted for about one-half of total GDP growth in Arkansas during 2010.  Wholesale trade and retail trade were also large contributors.  The sharp decline in information services subtracted nearly 0.6% from total growth, with other service sectors contributing modestly to the overall expansion.

Metro Area GDP – 2009

It takes some time to compile comprehensive GDP statistics for the nation’s 366 Metropolitan Statistical Areas (MSAs).  This morning, the Bureau of Economic Analysis released figures for 2009.  Although the numbers are not necessarily representative of more current economic conditions, they provide information about how Arkansas fared during the recession.  In that sense, they also give some indication of how the state’s MSAs were positioned to share in the nationwide economic recovery that began in the latter half of 2009 and into 2010.

As discussed in a previous post, Arkansas’ economy was one of only 10 states that showed positive GDP growth in 2009.  As shown in the Table below, GDP contracted in six of the seven MSAs that have a central city in Arkansas.  Only the Little Rock-North Little Rock-Conway MSA showed positive growth in 2009 (+2.4%).  This suggests that much of the growth revealed in the state-level GDP report for Arkansas was concentrated in the central part of the state.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

Although the state’s other six MSAs showed negative growth for the year, each compared favorably to nationwide averages.  The BEA reported that real GDP declined in 292 of the nations 366 MSAs (80%).  On average, the metropolitan areas of the nation contracted by 2.4%.  Jonesboro, the Arkansas MSA that showed the largest decline, contracted at a slightly greater pace.  Jonesboro was also the only Arkansas MSA that fell below the median growth rate.  But even the disappointing performance of GDP growth in Jonesboro is tempered by the observation that its economy had expanded by more than 4% in the previous year (an upward revision from previously-released data).  As shown in the map below, the relatively favorable performance of GDP growth in Arkansas’ MSAs fits within a nationwide pattern.  MSAs that experienced above-average growth tended to be concentrated in the region west of the Mississippi River and east of the Rocky Mountains.   

gdpmsa_0211

In the state-level GDP report, Arkansas growth was concentrated in some key sectors:  Mining, Information Services and Management Services.  The breakdown of sectoral contributions to GDP growth in Arkansas’ metro areas show similar patterns.  For example, Natural Resources and Mining contributed 0.4 percentage points to growth in the Little Rock metro area.  (This is undoubtedly related to natural gas extraction activities in the northern part of the MSA.)  Specialized service sectors contributed positively to growth across the state.  For example, Financial Activities expanded in Fayetteville, Jonesboro, Little Rock, Pine Bluff and Texarkana.  Professional and Business services provided positive growth in Hot Springs and Jonesboro.  Education and health services expanded in most of the state’s MSAs.

It will be another year before we see statistics for MSA GDP in 2010.  However, the patterns revealed in the 2009 data (along with other, more recent indicators) suggest that a positive economic growth is likely to have emerged for most regions of the state.

Arkansas Gross Domestic Product – 2009

Data for Gross Domestic Product by State were released this morning by the Bureau of Economic Analysis.  The numbers for Arkansas were something of a surprise.  Our state was one of only 10 that experienced positive growth in total output.  Arkansas’ growth rate of 0.6 percent (compared to the previous year) ranked 8th among the 50 states.  Overall, the United States experienced a decline of 2.1 percent.

GDP by State

A natural question that arises is this:  How can we reconcile relatively strong output growth with weak performance of labor markets?  After all, payroll employment in 2009 was down by more than 37 thousand jobs compared to the previous year.

In part, the answer involves rising productivity.  Businesses managed to produce more goods and services with fewer labor resources.  More important is the composition of growth.   GDP growth was concentrated in industries that are important for the Arkansas economy, but not necessarily the largest employers in the state.  The largest contributors to output growth included mining (+22.3%), Information Services (+20.8%), and Management services (+10.8%).  These three sectors together account for less than 5 percent of total employment in Arkansas.  On the other hand, some of the sectors that employ the most workers in Arkansas experienced contractions in 2009.   For example, output was lower in Manufacturing (-8.1%), and Transportation and Warehousing (-6.3%).   Manufacturing alone accounts for over 14 percent of Arkansas total employment.

Available data for 2010 suggest that output growth is spreading more broadly across the economy.  Sales, income, and employment are all showing signs of recovery.  When the GDP data for 2010 become available (a year from now), they should show more rapid and broad-based growth.