Arkansas’ real gross domestic product (GDP) output lost momentum in 2014 as the Natural State’s economic growth fell well below the rest of the nation and surrounding states, according to info released Wednesday by the U.S. Bureau of Economic Analysis (BEA).
In 2014, Arkansas’ economic growth advanced only a weak 0.8%, 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.
Since touching a robust 2.4% growth in 2011, Arkansas’ economy has struggled to gain momentum, bouncing between good and bad years, BEA statistics show. In 2012, state GDP fell 67% from the previous year to 0.8% before climbing back up to revised 1.9% in 2013. Originally, the BEA pegged Arkansas’ GDP growth at 2.4% a year ago, before revising the state’s growth level downward five points as more detailed economic data became available.
Marc Fusaro, associate professor of economics at Arkansas Tech University in Russellville, said the lagging income growth – particular in the state’s farming, utilities and other key sectors – played a major role in Arkansas’ economy falling behind the national GDP in 2014. An industry's GDP by state is calculated as the sum of incomes earned by labor and capital and the costs incurred in the production of goods and services. It includes the wages and salaries that workers earn, the income earned by individual or joint entrepreneurs as well as by corporations, and business taxes.
Fusaro, who manages the Arkansas Tech Business Index (ATBI), said personal income for the state’s expansive farming sector declined a whopping 19.9% in 2014.
“This is not out of line with the farming sector for the whole country which had a 17.1% decline,” Fusaro said of the farming sector, which includes agriculture, forestry, hunting and fishing. “(But) the difference is that farming is a much more important component of our economy than it is for the nation as a whole. Arkansas represents 0.8% of the nation’s personal income, but it represents 2.1% of the farming income.”
Fusaro also said utilities and transportation sectors, which substantially declined in 2014, also suffered similar fates as farming.
“Both (are) weak sectors, and both are proportionately more important sectors to the Arkansas economy than to the national economy,” he said. “In short, Arkansas suffered because our more important sectors were the same sectors which suffered.”
ECONOMIC SECTOR NUMBERS
Nationwide, real GDP increased in all eight BEA regions in 2014. Contributions from mining in Oklahoma and Texas led growth in the Southwest region (4.3%) – the fastest growing BEA region.
Professional, scientific, and technical services was the largest contributor to U.S. real GDP by state growth in 2014. This industry grew 4.2% in 2014 compared with 0.7% in 2013 and contributed 0.29 percentage point to U.S. real GDP growth. It was the leading contributor to growth in the New England and Far West regions and contributed to growth in 46 states and the District of Columbia. It was a large contributor to growth in three states — California, Massachusetts and Utah.
Nondurable goods manufacturing grew 4.2% in 2014 compared with 1.1% in 2013 and contributed 0.23 percentage point to U.S. real GDP growth. In 2014, this industry was the largest contributor to growth in the Great Lakes region and contributed to growth in 41 states. It made a substantial contribution to growth in Louisiana and Montana.
Real estate and rental and leasing grew 1.5% in 2014 down slightly from 1.6% in 2013 and contributed 0.20 percentage point to U.S. real GDP growth. In 2014, this industry was the largest contributor to growth in the Southeast region and contributed to growth in 32 states and the District of Columbia.
Although mining was not a significant contributor to real GDP growth for the U.S. economy, it did play a key role in several states. This industry was a large contributor in the five fastest growing states — North Dakota, Texas, Wyoming, West Virginia, and Colorado. By contrast, mining continued to decline in Alaska due to lower output on the state's North Slope.
Agriculture, forestry, fishing, and hunting declined in six of eight BEA regions in 2014. The industry declined in all seven states in the Plains region and subtracted significantly from growth in four states — South Dakota, Iowa, Nebraska and North Dakota.
PERSPECTIVE ON ARKANSAS ECONOMY
Despite the slow growth, Arkansas’ economy still ranked 38th, something that Little Rock economist Greg Kaza said is not to be taken lightly.
“The good news is that the days of being ranked 49th and 50th with Mississippi are long gone,” said Kaza, executive director of the Arkansas Policy Foundation.
Overall, Arkansas’ economy is valued at $121 billion economy, accounting for 0.7% of the national total of $17.3 trillion, the Department of Commerce report shows. Besides the utilities and farming, which includes agriculture, forestry and utilities, growth in construction, and information services were largely flat or fell behind of the rest of the state’s economy.
The biggest advancer in Arkansas was mining, which grew by 0.52%. However, those numbers are expected to decline in 2015 as oil and gas companies primarily operating in the Fayetteville Shale have cut capital spending and hiring. Other sectors with nominal growth were finance and insurance, durable and nondurable goods, wholesale and retail trade.
Nationally, mining also drove growth in the fastest-growing states, North Dakota and Texas, which grew 6.3% and 5.2%, respectively. Wyoming and West Virginia followed at 5.1% GDP growth.
Alaska was the biggest decliner, shrinking by 1.3%. Mississippi did not move out of its traditional spot near the bottom at 49th, with GDP down 1.2%. Virginia, at 47th, was the only state that remained flat, while all other states did see some growth.