Arkansas saw weak real gross domestic product (GDP) of only 1.5% in the fourth quarter of 2018, well below the national standard of 2.2% and 34th among the 50 U.S. states, according to the latest report from the Bureau of Economic Analysis (BEA).
The BEA report, published on May 1, also revised estimates for the previous four quarters, pushing down overall growth for Arkansas from the fourth quarter of 2017 through the three-month period ending Sept. 31, 2018. For example, GDP growth of 1.9% in the third quarter was revised downward to only 0.6%.
The most notable revision was Arkansas’ second-quarter GDP growth of 4.4%, which ranked 10th in the nation. It was downgraded to GDP growth of only 1.7%, pushing Arkansas well below the national average of 2.1%. Likewise, the fourth quarter of 2017 and first quarter of 2018 were downgraded to GDP growth of 1.8% and 1%, respectively, compared to previous estimates of 2.7% and 2%, BEA data shows.
“As is often the case, data revisions that came out with the (GDP) report are important for putting the most recent data into context,” University of Arkansas at Little Rock economist Michael Pakko said. “For Arkansas, these revisions raised estimates of GDP growth in late 2016 and early 2017, but lowered growth estimates for more recent quarters.”
For the year, Arkansas saw GDP growth of only 0.9% in 2018, which pales in comparison to U.S. GDP growth in 2018 of 2.9%. Over the past five years, according to Pakko, Arkansas GDP growth has averaged 0.9% while the U.S. growth rate has averaged 2%.
BY STATE AND BY SECTOR
Nationwide, real GDP — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes — increased in 49 states and the District of Columbia in the fourth quarter of 2018. The percent change in real GDP in the fourth quarter ranged from 6.6% in energy-rich Texas to flatline growth in the state of Delaware, BEA data shows. After Texas, Oklahoma and New Mexico had the second- and third-largest economic expansion at the end of December at 5.5% and 4.1%, respectively.
Overall, wholesale trade, mining, and information services were the leading contributors to the increase in real GDP nationally. Mining, which includes the oil and gas industry, and wholesale trade were the leading contributors to the increase in real GDP in Texas, the fastest growing state.
On an annual basis, real GDP also increased in 49 states and the District of Columbia in 2018. The percent change in real GDP ranged from 5.7% in Washington to -0.3% in Alaska. Information services and retail trade were the leading contributors to the increase in real GDP in Washington, the fastest growing state
Besides Washington, information services were the leading contributor to the increase in real GDP in four additional states, including California. Professional, scientific, and technical services were the leading contributor to the increase in real GDP in Utah, the second fastest growing state. Durable goods manufacturing was the leading contributor to the increase in real GDP in Idaho, the third fastest-growing state.
In Arkansas, the leading contributor to the state’s $129.8 billion economic output in the fourth quarter was wholesale trade at 0.91%. Durable goods manufacturing had a strong showing as well at 0.3%. “Both are relatively large, important sectors in the Arkansas economy,” Pakko said.
Other growing sectors in the Natural State in the fourth quarter included real estate, management of companies and enterprises, and health care and social assistance. Oil and gas production also gave the Arkansas economy a slight year-end boost of 0.14%, Pakko said, “but that sector is not as large a contributor to our state’s economy as it is to other states in the region.”
AGRICULTURE TAKES A HIT
One notable declining sector was agriculture at -0.17%, compared to overall U.S. growth in the farming sector in the fourth quarter of 2.2%.
Pakko, who publishes the Arkansas Economist blog, said the contrast between this downturn in production and the surge in farm income in the fourth-quarter seen in the recent personal income data is largely attributable to payments made to farmers as part of the USDA’s Market Facilitation Program.
Those direct payments were promised by the federal government to offset losses impacting agricultural producers affected by the Trump administration’s trade and tariff policies, in particular with China.
Initially, $12 billion in funding was allocated for the program, including payments to eligible producers of soybeans, sorghum, corn, wheat, cotton, dairy, hogs, shelled almonds, and fresh sweet cherries. The USDA has recently noted that the program has paid out more than $8.3 billion to nearly 600,000 applicants.
“Payments to soybean farmers have comprised a large share of the payouts, and should continue to boost farm incomes in the income data for the first quarter of 2019,” said Pakko.