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GDP By U.S. State: A Closer Look at Regional Growth

27 Oct 06

In late October, the Bureau of Economic Analysis released revised estimates of total output by state, along with estimates of breakdowns by industry. The data was formerly known as Gross State Product, but has been renamed Gross Domestic Product by State.

The Bureau of Economic Analysis (BEA) released its newest estimates of economic output by state on October 26. Formerly known as Gross State Product (GSP), the BEA announced that it would be changing the name to Gross Domestic Product (GDP) by State. The name is not the only thing that changed; new estimation methods are being used in the calculation of GDP by State that should align the data better with the national product accounts. In this release, the BEA published revised estimates of total GDP by State for 2005, along with its first estimates of sector breakdowns.

The distribution of GDP by State growth did not change appreciably since the preliminary estimates released in June. The fast growing states are still in the Southeast and Western portions of the country, while the Midwest continues to lag. One state that did get a major revision is Delaware: from1.4% growth in the June release to 5.4% in the revised estimate. Nearly all growth in that state was in the finance and insurance sector. Tennessee, Alabama, Mississippi, and Utah were each revised upward by more than 1%; while Wyoming, Alaska, West Virginia, and New Hampshire were revised downward by more than 1%.

The sectoral detail contained in the release offers a look at the drivers of growth for different areas of the country. The durable goods manufacturing sector was a boon for newer manufacturing areas and much slower for the older manufacturing centers in the Midwest. In the East North Central, that sector contributed just 0.1% to growth as expansion in Illinois, Indiana, and Wisconsin were barely able to overcome output declines in Michigan and Ohio. The latter states continue to be mired in automobile industry problems. Both the Mountain and Pacific regions received a contribution of 0.7% from the durable goods sector. A large share of this sector in these regions is computer and electronic products manufacturing, a sector which expanded rapidly last year. More than 25% of manufacturing jobs in Arizona, New Mexico, and Idaho (Mountain) are in computers and electronic products, while Oregon in the Pacific region has a high share (20%) in that sector as well.

Contributions to Real GDP by State Growth 2004–05

 

Real GDP Growth

Durable Goods Mfg.

Real Estate,

Rental, and Leasing

Construction

Healthcare and

Social Assistance

United States

3.6

0.4

0.3

0.1

0.3

New England

2.3

0.3

0.3

0.0

0.4

Middle Atlantic

2.6

0.2

0.0

0.0

0.3

South Atlantic

5.5

0.3

0.8

0.3

0.3

East South Central

3.3

0.5

0.2

0.1

0.4

West South Central

3.6

0.6

0.1

0.2

0.3

East North Central

1.2

0.1

-0.1

-0.1

0.3

West North Central

2.3

0.5

0.2

0.0

0.3

Mountain

6.6

0.7

0.9

0.6

0.4

Pacific

4.2

0.7

0.4

0.2

0.3

The contributions of the Real Estate and Construction sectors show the varying impacts of the regional housing markets in 2005. The regions with rapidly expanding housing markets in 2005 – South Atlantic, Mountain, and Pacific – got higher contributions to total output from the sectors most closely linked to that industry. The slower housing markets in the East North Central region were a drag on economic growth.

It is also worth pointing out not just the differences in regional economies, but also where they are similar. Healthcare and Social Assistance is a sector with high demand in every area of the country, and will become increasingly important as the large Baby Boomer generation ages. The contributions to GDP growth across regions were remarkably consistent across geographies in 2005.

By Luke Tilley

 
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