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State’s GDP hit 10-year high in 2018

By TED CARTER

Most years, Mississippi’s state economist Darrin Webb sees a lot of sameness in analyzing the state’s Gross Domestic Product, personal income and other economic indicators.

But a break in the sameness has occurred. Calculations show last year brought something Mississippi has not seen in 11 years:  Real GDP growth of 1 percent or more.

Mississippi’s initial real GDP growth estimate came in at 1.4 percent. The U.S. Bureau of Economic Analysis whittled that to 1 percent in its May 2 release of revised calculations for the market value of goods and services nationally and in the states.

Still, 1 percent Mississippi growth marks the largest annual increase in the state’s real GDP since 2008, the last year the state’s economy grew by at least 1 percent, state economists said in the Mississippi Economic Outlook issued in late April by the University Research Center of the Mississippi Institutes of Higher Learning.

The spring Outlook report also forecast 1.4 percent real GDP growth for 2019.

A further positive for 2019: Personal income growth of 3.6 percent for Mississippians, according to the federal Bureau of Economic Analysis, or BEA. The BEA said Mississippi showed even better personal income growth in 2018 at 3.8 percent, the largest increase since 2011.

“Everything is relative,” state economist Webb said. “We’ve seen a little bit of improved growth” in income.

 

 

In an interview shortly after the Bureau of Economic Analysis’s GDP report, Webb said while Mississippi’s GDP number is at a 10-year high, the “story is the same: overall strong economic growth at a relatively slow pace.”

The slow pace, Webb said, is in comparison to neighboring and nearby states, many of which achieved stronger annual GDP growth after the end of the Great recession earlier in the decade and continue to do so. Alabama’s real, adjusted for inflation, GDP grew by 2 percent in 2018; Georgia’s 2.6 percent; Tennessee, 3 percent; Missouri, 2 percent; and Louisiana, 1.1 percent.

Also, unlike other Southern states, Mississippi slipped into recession in 2014, with its GDP dropping to a negative 1 percent.  By 2016, state GDP rebounded to 2 percent, however.

An advance estimate from the BEA, put the national GDP growth rate at 3.2 percent. The BEA attributes the national GDP acceleration to an upturn in state and local government spending, speedups in private inventory investment and in exports, and a smaller decrease in residential investment.

Mississippi “is always going to be a little flatter” in GDP growth than the national figure, Webb noted.

He theorized that the 2018 federal tax cuts gave Mississippi’s economy a boost, at least in the short term. On the whole, Webb said he does not dispute other economists who likened the stimulating effects nationally of the tax cuts geared to corporations and the well-to-do to a “sugar high.”

In Mississippi, tax cuts for business and individuals began last year with the first phase of eliminating the state’s $260 million annual corporate franchise tax along with what are projected to be cuts of $145 million annually in individual income taxes. Legislators designed the cuts to phase in over 12 years.

So far, the cuts have not noticeably diminished state revenue collections, which last year reached $5.5 billion and in 2017 $5.4 billion. Lawmakers predicted the cuts will be offset by new revenues that come from increased corporate and individual spending. Corporate tax collections totaled $575 million in fiscal 2018, according to the Mississippi Department of Revenue, which put fiscal 2017 corporate tax collections at $563 million.

The state’s current fiscal cushion materialized after a fiscal 2017 in which drop-offs in revenue collections forced Gov. Phil Bryant to make emergency budget cuts of nearly $175 million and draw tens of millions of dollars from the state’s Budget Stabilization Fund. Legislators have since restored the fund to its previous level in the $400 million range.

Since it’s early in the dozen-year phase-in of the tax cuts, economist Webb is not prepared to credit them with returning state revenue to healthier levels. “I’m not real sure what’s driving that,” he said.

Webb noted, though, that income growth and newly enacted sales taxes on certain internet purchases have helped to juice state revenues.

Corey Miller, economic analyst at the University Research Center, noted that although it is early in fiscal 2019, “trends look favorable for revenues so far.”

In the spring Outlook, Miller noted the BEA’s forecast of 3.6 percent growth in personal income reflects a .07 percent increase from the previous quarter.

Mississippi employment growth of .03 percent in 2018 marked the lowest growth rate since 2011, according to the U.S. Bureau of Labor Statistics. The Bureau projects a rebound to .09 percent job growth this year and a return to .03 percent growth in 2020.

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About Ted Carter