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Reports of below-the-national-average growth no cause for concern

Mississippi GDP stats can be misleading at times

Recent news that Mississippi’s rate of economic growth is slightly below the national average shouldn’t be cause for concern, says state economist Dr. Phil Pepper.

Recent statistics released by the U.S. Commerce Department show that the Mississippi economy as measured by gross domestic product (GDP), the total output of goods and services, grew at a rate of 3% in 1997 compared to a national average of 4.3%.

The top two states for economic growth were Oregon at 7.6% and New Hampshire at 7.5%. The states that had the smallest growth were Hawaii, which posted a decline of .2%; Alaska, which was up only .4%; North Dakota, up .6%; West Virginia, up .9%; and South Dakota, up 1.7%.

Pepper said that just looking at GDP for one year is too short a time to get a true picture of the economic vitality of a state. If a state surges ahead one year, it may have difficulty continuing to post such large gains. A couple of years ago North Dakota and South Dakota were on the top of the GDP list, and now they are at the bottom.

“You’ll see some states with low growth for a while, and then they will have a spurt,” Pepper said. “The states that didn’t do well this time are the same states that have been doing so well in the past. They simply couldn’t keep that up. So you really need to look at a longer time period than one year. When you look at several years of growth, I think you’ll see that Mississippi’s economy has been growing faster than the national average.”

Mississippi GDP was about $58 billion in 1997 compared to $56 billion in 1996 and $54 billion in 1995. That compared to a GDP of only $16 billion in 1977.

Pepper said Mississippi may not be growing as fast as some parts of the country, but he believes the state is growing faster than the statistics indicate. He said there are some other statistical indicators that may be a better measure of the overall health of the economy in Mississippi. For example, employment in Mississippi has been growing at a good rate, and revenues to the state’s general fund are on the upswing.

“What we hear about revenues to the general fund in Mississippi is a good indicator of what is going on in the economy,” Pepper said. “The general fund revenue is growing this current fiscal year the fastest four out of the past 20 years. Two of those years’ general fund increased because gaming was coming on or taxes increased. To have this kind of revenue growth now without gaming just coming on or having a tax increase suggests the economy as a whole is growing.”

The percent increase of GDP can also be somewhat misleading when you consider that a small state like North Dakota has a small GDP, so it doesn’t take much increase to make the state seem to have in impressive increase in the GDP. The five states with the smallest economies produce only .2% each of the total nation’s GDP. Those five states are Montana, North Dakota, South Dakota, Vermont and Wyoming.

That compares to California, the state with the largest GDP, which produced 12.7% of the nation’s total goods and services in 1997, which totalled $8.1 trillion. The four other states with the largest GDP were New York, 8%; Texas, 7.4%; Illinois, 4.9%; and Florida, 4.7%. Together the five largest state economies represent 40% of the nation’s economy.

While the national GDP is usually adjusted for inflation, officials said the state reports are for actual dollar amounts without adjusting for inflation because of the lack of good price indexes on a state-by-state level.

More detail on the gross state GDP can be found at the Bureau of Economic Analysis’ Web site www.bea.doc.gov under the regional heading.


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