By PBN Staff
BOSTON – Massachusetts’ real gross state product increased at a 1.9 percent annualized rate during the third quarter, according to the Current Economic Index released Friday by MassBenchmarks.
According to the report, which is published by the University of Massachusetts Donahue Institute in collaboration with the Federal Reserve Bank of Boston, the U.S. real gross domestic product grew at a 2 percent annualized rate during the same period.
During the first and second quarters, Massachusetts’ economy grew at revised annual rates of 2 and 3 percent, respectively, well below the 4 percent rate of growth originally reported for each quarter this year. The U.S. economy grew at annual rates of 2 percent and 1.3 percent during the first two quarters, respectively.
The state’s economy slowed in the third quarter, according to the report. Payroll employment growth slowed from 1.6 percent in the second quarter to 0.2 percent in the third.
The state’s unemployment rate increased by half a percentage point during the third quarter, from 6 percent in June to 6.5 percent in September.
“While wage and salary income grew at a respectable annualized rate of 5.5 percent in the third quarter, spending on items subject to the regular sales tax and motor vehicles tax declined by an annual rate of 1.5 percent in the third quarter, according to state withholding and sales tax data,” said the report.
The MassBenchmarks report pointed toward economic difficulties in Europe and the global growth slowdown as a main drag on the state’s economy.
Massachusetts’ merchandise exports in the first eight months of 2012 saw a decline of 5.9 percent compared with the same period in 2011. Comparatively, U.S. exports grew 5.6 percent during the same period.
“The Commonwealth’s weaker performance reflects its higher reliance on Europe as an export destination,” said the report, adding that stagnant demand for information technology also contributed to the state’s economic slowdown.
Despite a slow overall performance and a poor outlook for the remainder of 2012, employment in computer systems, consulting, scientific research and development, software, and durable manufacturing have continued to increase in Massachusetts despite weakness in other sectors of the Bay State’s economy.
The MassBenchmarks Leading Economic Index, a forecast of the growth in the current index over the next six months, was 2.3 percent for September and the three-month average of July through September. It indicates that the Bay State economy is expected to grow at an annualized rate of 2.3 percent through March 2013.
“If the state’s economy continues to grow at the pace predicted by the leading index, and if productivity growth returns to its trend rate, real Massachusetts gross domestic product is expected to grow at 2.3 percent annual rate in the fourth quarter of this year and in the first quarter of 2013,” Alan Clayton-Matthews, MassBenchmarks senior contributing editor and associate professor of economics and public policy at Northeastern University, said in the report.
“Given expected productivity growth, this trend is consistent with an expectation of virtually no net employment growth in Massachusetts over the next six months,” Clayton-Matthews added.
To view the full MassBenchmarks report, visit: www.massbenchmarks.org.