Arkansas’ strong economic expansion hit a wall in the third quarter as the state’s gross domestic product (GDP) decelerated to a weak 2%, putting the Natural State among the slowest growing economies in the union, according to data released Wednesday (Jan. 24) by the U.S. Bureau of Economic Analysis (BEA).
After impressive but sequentially declining growth of 4.8%, 4%, and 3.5% real GDP growth in the previous three quarters, the state’s economic output stalled going into the second half of 2017 as the state’s agriculture and farming sector remained in a protracted downturn.
The GDP estimates from the economic analysis group within the U.S. Department of Commerce comes one day after the U.S. Labor Department reported that Arkansas shed more than 10,000 jobs at the end of 2017, putting a sour end note on an otherwise strong year for the state’s overall economy.
In his Rural Mainstreet Index for January, a monthly snapshot of 200 rural communities across the Midwest with average populations of 1,300 people, Creighton University economist Ernie Goss said the farmland price index had fallen for the 50th straight month and 40% of bank CEOs named rising loan defaults as the greatest economic challenge for rural areas in 2018.
In addition to concerns about loan defaults and falling farmland prices, Goss said some farmers are also concerned about a resolution on a new North American Free Trade Agreement (NAFTA) as the Trump administration continues talks with Canada and Mexico on the three-country trade pact.
“Concerns about trade, especially current NAFTA negotiations, and low agriculture commodity prices continue to restrain bankers’ economic outlook. Approximately 71.2% of bankers projected that any interruption or abolition of NAFTA would have a negative impact on their area,” said Goss.
In Arkansas, the BEA data shows the state’s current-dollar economic output was only $121.3 billion for the three-month period ended Sept. 30, down 5.1% from $127.8 billion in the previous quarter and flat compared to a year ago growth of $121 billion. That represents only 0.7% of the total U.S. current-dollar GDP growth of $19.3 trillion in the third quarter.
The dismal third quarter growth pushes Arkansas, at 43rd, near the bottom of the rankings for GDP output among all 50 states. Arkansas held a top-tier spot in percentage GDP growth in the previous three quarters, including top 10 rankings in the fourth quarter of 2016 and the first quarter of 2017 when state GDP growth reached 4.8% and 4%, respectively.
Among key sectors, retail and wholesale trades grew at the quickest rate at 0.51% and 0.48%, respectively. Other sectors that expanded were finance and insurance (0.47%), health care and social assistance (0.4%), durable goods manufacturing (0.38%), information (0.27%), administrative and waste management (0.12%) professional and business services (0.11%) and construction (0.07%).
As noted, the state’s agriculture, forestry, fishing and hunting sector was the biggest decliner at (0.44%). Other industries that lost ground during the quarter were real estate and leasing (0.25%), utilities (0.13%), government (0.9%) nondurable goods manufacturing (0.08%). Most other sectors were flat.
For the nation, BEA data shows real GDP growth increased in every state and the District of Columbia in the third quarter of 2017. State growth ranged from a high of 5.7% in Delaware to only 0.5% in South Dakota. Seventeen of 21 industry groups expanded in the third quarter with finance and insurance, durable goods manufacturing, and information services the leading contributors to U.S. economic growth.
Finance and insurance increased 14.7% nationally and contributed to growth in every state and Washington, D.C. This industry was the leading contributor to growth in seven of the ten fastest growing states, BEA officials said.
Surprisingly, durable goods manufacturing also continued its turnaround, increasing for the sixth consecutive quarter of growth at 7.5%. This industry increased in 49 states and the District of Columbia, and was the leading contributor to growth in Oregon.
The mining sector, which represents the nation’s oil and gas industry, improved 9.7% nationally – the fourth consecutive quarter of growth. Although this industry wasn’t a leading contributor to growth for the nation, it was the leading contributor to growth in Texas – the second-fastest growing state. In Arkansas, the state’s oil and gas sector remained flat with zero growth in the third quarter.