RIPEC: Economy expected to contract in 2Q

THE RHODE ISLAND LEADING Economic Indicator is estimating that the state economy will experience positive – but modest – growth in the third quarter at an annualized rate of 0.3 percent. The Rhode Island economy is expected to shrink 1.2 percent in the second quarter. / COURTESY RHODE ISLAND PUBLIC EXPENDITURE COUNCIL
THE RHODE ISLAND LEADING Economic Indicator is estimating that the state economy will experience positive – but modest – growth in the third quarter at an annualized rate of 0.3 percent. The Rhode Island economy is expected to shrink 1.2 percent in the second quarter. / COURTESY RHODE ISLAND PUBLIC EXPENDITURE COUNCIL

PROVIDENCE – The Rhode Island economy contracted in the second quarter at an annualized rate of 1.2 percent, according to the Rhode Island Current Economic Indicator briefing released Friday by the Center for Global and Regional Economic Studies at Bryant University and the Rhode Island Public Expenditure Council.

Going forward, the economic outlook is less optimistic than it appeared at the end of the first quarter.
The LEI is estimating that the state economy will experience positive – but modest – growth in the third quarter at an annualized rate of 0.3 percent.
The report said Rhode Island’s slowdown is consistent with regional trends, noting an overall slowdown in growth in New England.
In the second quarter, the CEI estimates that the New England economy increased at an annualized rate of 0.4 percent in the second quarter compared with 1.5 percent in the first quarter.
The CEI said the national outlook is “brighter,” with U.S. Gross Domestic Product rising at an annualized rate of 1.2 percent in the second quarter compared with 0.8 percent in the first quarter.

Six of the 11 internal factors that comprise the Rhode Island CEI negatively affected economic growth in the second quarter. General sales and gross receipt taxes, which RIPEC described as a proxy for state aggregate demand, decreased by 2.8 percent, ending a streak of positive growth since 2010. Initial unemployment claims also increased in the second quarter, though the 3.5 percent increase is smaller than the 9.6 percent increase reported in the first quarter.
Also, four major industries experienced a decrease in employment during the second quarter:

  • Construction employment fell 26 percent, despite this being among the busiest times for the construction industry. This sector had employment growth of 27.4 percent in the first quarter.
  • The professional and business services industry saw employment fall 4.2 percent, compared with an increase of 13.8 percent in the first quarter.
  • Employment in information services fell 9 percent in the second quarter, compared with a decline of 4.5 percent in the first quarter.
  • Employment in financial services decreased 3.1 percent in the second quarter, compared with an increase of 3.2 percent in the first quarter.

Five internal indicators positively influenced the Rhode Island CEI in the second quarter, which RIPEC said suggests that the state economy is not heading for a recession yet:

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  • Education and health services, the largest industry in the state, saw employment increase 3.7 percent compared with a decline of 3.9 percent in the first quarter.
  • Employment in trade, transportation and utilities services climbed 1.1 percent, after declining for two consecutive quarters.
  • Employment in the leisure and hospitality services industry and the manufacturing industry also grew, by 0.7 percent and 2.9 percent, respectively.
  • Real total wages and salary disbursements increased in the quarter, though the 0.6 percent expansion in the second quarter is lower than the growth experienced in the first quarter of 2016 at 4.8 percent.

In addition, estimates of the state’s economic growth over the previous three quarters have been revised downward to account for adjustments and corrections by the U.S. Bureau of Labor Statistics.

The report said that the annualized annualized quarterly growth rate has been revised downward to 1.6 percent from 3 percent for the first quarter; to 1.7 percent from 2.9 for fourth quarter 2015; and to negative 0.4 percent from 2.1 percent for third quarter 2015.
“These revisions to the historical data, combined with the second quarter’s projected negative growth, suggest that Rhode Island’s recent economic performance and long-term recovery from the Great Recession is not as robust as it appeared at the end of the first quarter of 2016,” the briefing stated.
Developed by economists at The Center for Global and Regional Economic Studies at Bryant University, the quarterly CEI combines several key gauges of economic activity in a single statistic that measures the overall current economic conditions in Rhode Island.
The full report can be found HERE.

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