Many of the nation’s industrial sectors saw major declines in the first quarter of 2014 as 16 of 22 industry groups contributed to the 2.9% decrease in U.S. economic activity, according to a quarterly report from the U.S. Bureau of Economic Analysis (BEA).
The bellwether industry data from the U.S. Department of Commerce is derived from last month’s GDP report showing the U.S. economy fell nearly three points in the first quarter of 2014, following an increase of 2.6% in the fourth quarter of 2013.
Overall, both private services- and goods-producing industries contributed to the decrease, while the government sector increased slightly. Durable-goods manufacturing; wholesale trade; and agriculture, forestry, fishing, and hunting, all key contributors to the Arkansas economy, were major factors in the GDP decline.
The new report from the U.S. Department of Commerce’s statistical arm could also put a damper on last month’s news that Arkansas’ economy grew 2.4% in 2013. At the time, John Shelnutt, head of the Arkansas Department of Finance and Administration’s Economic Analysis and Tax Research division, called the sources of growth in Arkansas “a little unusual.”
He said the state experienced robust gains in the service and agriculture sectors, but saw contraction in construction and manufacturing. But the most unusual source of growth came in the mining sector, which saw a huge decline in 2012 as natural gas prices and low rig counts buffeted the Fayetteville Shale.
“That is a little odd because it is a volatile sector where (growth) doesn’t persist year after year, or multiple years,” Shelnutt said. “It could be seen as a one-time contribution. It is a rebound from the negative year in 2012, but goes beyond a simple recovery.”
Other recent signs of a downturn in Arkansas came in a June 24 report from the U.S. Commerce Department indicating that personal income fell 0.2% in the first quarter as earnings for state workers failed to keep pace with inflation and Arkansas farms lost more than $1 billion.
And to add fuel to the fire, the first quarter downturn across the U.S. was not limited. Overall, 19 out of 22 industry groups contributed to the 5.5 percentage points downturn in real GDP; the leading contributors to the downturn were wholesale trade; professional, scientific, and technical services; and durable-goods manufacturing.
Here are some other highlights of the BEA report:
• Growth in real value added slowed for nondurable-goods manufacturing in the first quarter; however, the industry group contributed the largest positive offset to the decrease in real GDP in the first quarter. Nondurable-goods manufacturing, which includes petroleum and coal product manufacturing, increased 15.1% in the first quarter of 2014, after an increase of 18.6% in the fourth quarter;
• Professional, scientific, and technical services turned down in the first quarter, decreasing 6.5% after increasing 5.9% in the fourth quarter. Professional, scientific, and technical services includes industries such as legal services, engineering, and administrative management and management consulting services; and
• Federal government turned up 3.2% in the first quarter—its first increase since the second quarter of 2011.
Economists are split on the direction the economy is heading. There is a school of thought that blames the rough first quarter numbers on harsh winter weather that crippled the U.S. economy for weeks. Other economists predict the financial markets will lose steam and are awaiting other indicators of second quarter performance.
This is only the second time that the BEA has published quarterly GDP by industry statistics. The first release was on April 25, 2014, spanning the period 2005 through the fourth quarter of 2013. Previously, BEA published these statistics only on an annual basis, so businesses and policymakers had a much longer wait for such information.
Generally, GDP statistics are monitored closely by businesses to help them make decisions about whether to boost hiring and to expand capital spending. Real gross domestic product, or GDP, is the output of goods and services produced by U.S. workers.