Arkansas’ real gross domestic product (GDP) output in the third quarter ranked 33rd among the 50 states as the state’s economy produced more than $123 billion in economic activity at growth rate of 1.9%, according to information released Wednesday by the U.S. Bureau of Economic Analysis (BEA).
That level of GDP growth puts the state on the same path as the overall U.S. economy, which slowed to an annual rate of 1.9% in the third quarter of 2015 after increasing 3.8 percent in the second quarter.
In the third quarter of 2014, Arkansas’ economic growth advanced only a weak 1.5%, well behind overall U.S. growth of 2.2% and an overall GDP growth of 1.7% for the vast 12-state Southeast region that encompasses most of the Southern states, according to statistics from the U.S. Department of Commerce analysis arm.
Marc Fusaro, associate professor of economics at Arkansas Tech University in Russellville, said the fact that the Arkansas GDP growth is keeping up with the overall U.S. economy is a good sign, given that the state usually lags a little behind on most leading economic indicators.
“The second and third quarter (GDP) is tracking the national economy, so we have seen consistent growth most of the year,” he said.
ARKANSAS’ ECONOMY ON A BUMPY RIDE
According to the BEA figures for the past fourth quarter, Arkansas’ economy had a bumpy ride going back to the end of 2014 when state GDP closed out the year at a robust 3.7%. However, 2015, got off to a rough start when growth in the first quarter declined 2.6%.
But like the rest of the nation, Arkansas GDP rebounded in the second quarter with when growth rebounded to a strong 4.0%. Yet national GDP growth in the second half of 2015 was a far cry from the robust acceleration of 3.9% that the nation’s economy experienced in the second quarter.
As noted by Fusaro, U.S. growth in the third quarter slowed to 1.9%, and has further decelerated in the fourth quarter to only 1% as consumers and investors are more cautious, and there has been a significant slowdown in local and state government outlays.
In Arkansas, construction was the largest contributor to the state’s growth at 0.53%. Agriculture, fishing and hunting followed closely at 0.51%. Utilities, nondurable goods manufacturing, wholesale trade and information also saw positive growth. The leading loser was the state’s retail industry at -0.57%. Arkansas mining sector, which includes the state’s declining oil and gas industry, also shrank with growth of -0.18%, following by transportation and warehousing at -0.15%. Finance and insurance and durable goods also saw negative growth.
Fusaro said the biggest surprise in the state’s growth was the construction industry, which he said is a good predictor of the state’s future business fortunes.
In Talk Business & Politics’ most recent quarterly The Compass Report, economic conditions in Central Arkansas and Northwest Arkansas also were on the uptick compared to the third quarter of 2014.
Job growth and gains in sales tax revenue in Northwest Arkansas and the central Arkansas metro areas continued into the third quarter of 2015, according to The Compass Report. The Fort Smith metro economy was flat with the second quarter and fell behind gains posted in the third quarter of 2014.
Jeff Collins, the economist for Talk Business & Politics who gathers data used in The Compass Report, said the U.S. economy should continue to do well, which helps Arkansas’ three large metro areas. Continued improvements in the national jobless rate could also help with wage growth.
“Improvement in the national unemployment rate has finally reached a point which corresponds to upward pressure on wages. The unemployment rate stood at 5.3% at the end of the third quarter. Of the 387 MSAs in the country, only 2 posted rates above 10% in September and 2 had rates below 3%. No Arkansas MSA had a rate above 8%,” said Collins, who also is a former director of the Center for Business and Economic Research at the University of Arkansas.
GDP GROWTH IN OTHER STATES
Nationally, GDP increased in 47 states and the District of Columbia in the third quarter of 2015, according to statistics on the geographic breakout by the BEA. Bureau of Economic Analysis. South Dakota, the fastest growing state in the nation, grew 9.2% in the third quarter of 2015.
Kansas and Iowa were the second- and third-fasting growing states with GDP of 65.5% and 6.4%, respectively. While growth in South Dakota led the nation, economic growth in North Dakota went backwards at -3.45%, the worst in the nation. Alaska and West Virginia also saw negative growth at -1.2% and 2%, ranking 48th and 49th , respectively, among the 50 states.
Other highlights of the GDP report by state, include:
• Retail trade grew 7.1% in the third quarter of 2015. This industry contributed 0.41 percentage point to U.S. real GDP growth and contributed to growth in 49 states and the District of Columbia. Nevada was the lone exception. Retail trade was the leading contributor to growth in 13 states and contributed 0.63 percentage point to real GDP growth in Arizona and 0.62 percentage point to real GDP growth in Washington.
• Health care and social assistance grew 5.5% in the third quarter of 2015. This industry contributed 0.39 percentage point to U.S. real GDP growth and contributed to growth in 49 states and the District of Columbia. North Dakota was the lone exception. Health care and social assistance contributed more than half a percentage point to real GDP growth in Maine, Wisconsin, Arizona, and Indiana.
• Agriculture, forestry, fishing, and hunting grew 37.5% in the third quarter of 2015. This industry contributed 0.36 percentage point to real GDP growth for the nation and was the largest contributor to real GDP growth in the Plains region. Agriculture, forestry, fishing, and hunting contributed 6.91 percentage points to real GDP growth in South Dakota, 5.41 percentage points to growth in Kansas, and 4.79 percentage points to growth in Nebraska.
• Wholesale trade declined 5.8% in the third quarter after an increase in the second quarter of 2015. This industry subtracted 0.36 percentage point from U.S. real GDP growth and subtracted from growth in every state and the District of Columbia.
• Mining declined 8.3% the nation in the third quarter of 2015. This industry slowed growth in most mining states and subtracted more than a percentage point from real GDP growth in North Dakota, West Virginia, Oklahoma, and Wyoming.
The BEA is expected to release its third and final revised GDP on March 25. The growth rate of real GDP is a key indicator of economic activity, but the official estimate is released with a delay. The Atlanta Federal Reserve’s updated GDPNow model forecast for real GDP growth in the first quarter of 2016 is now expected to come in at 1.9%, well above last week’s second revision of 1%.
The final revision will include additional data on fourth quarter and yearly earnings on U.S. companies. The GDPNow forecast for first-quarter GDP growth is 3.1%, according to the Atlanta Fed.