Vehicle Shortage Drives Drop In Car Sales
Growth in the Massachusetts economy slowed significantly during the third quarter and the economic analysts at MassBenchmarks reported Thursday that their outlook for the next six months is less optimistic than it was previously as the Delta variant persists and consumer spending slows.
The state’s real gross domestic product increased at a 2 percent annualized rate in the third quarter, matching the national growth rate for the same period but stepping down from state growth rates of 6.1 percent in the first quarter and 8 percent in the second quarter, the publication from the University of Massachusetts Donahue Institute said.
“The slowdown in growth from the second quarter reflects the effects of the Delta variant of COVID-19 restraining the pace of reopening, continued supply chain disruptions and labor shortages, and less exuberant consumer spending on goods, especially durable goods, “Alan Clayton-Matthews, a Northeastern University professor emeritus and senior contributing editor of MassBenchmarks, wrote. “Much of the growth that did occur reflects increased consumer spending on services and job growth in the leisure and hospitality and other services sectors. Inflation means that consumer spending’s effect on real output is diminished, and this also affects real GDP growth.”
Spending that is subject to the state’s sales tax or motor vehicle sales tax declined at a 5.8 percent annual rate in the third quarter after having climbed by a 40.3 percent annual rate in the second quarter of the year. Clayton-Matthews said the drop was fueled mostly by a shortage of motor vehicles that has contributed to a roughly 37 percent annual drop in their sales.
Jobs in Massachusetts grew at a 6.9 percent annual rate in the third quarter as compared to a 4.3 percent annual rate in the second quarter. Employment has grown by 6.2 percent in Massachusetts versus 4.6 percent for the country over the last year, MassBenchmarks said. Though the state’s unemployment rate climbed from 4.9 percent in June to 5.2 percent in September, Clayton-Matthews said it could indicate more people returning to the workforce.
“One encouraging sign is that the number of persons who are working part time but who want full-time work has returned to pre-pandemic levels. However, labor market conditions are still far from normal. In February 2020, the state’s unemployment rate was 2.8 percent or just over half of the September 2021 rate,” he said.
During the third quarter of 2021 (which covers the same period of time as the first quarter of fiscal year 2022), the Massachusetts Department of Revenue collected $8.751 billion from residents and businesses — $1.501 billion or 20.7 percent greater than actual collections during the same time period of fiscal 2021 and $525 million or 6.4 percent above the administration’s benchmark for the three months of July, August and September.
And state lawmakers are poised to pump another $3.65 billion into the economy as they debate legislation spending state surplus dollars and federal American Rescue Plan Act money into areas like housing, schools and workforce development, while also stashing away another roughly $2.75 billion to be spent at a later date.
For the fourth quarter of 2021 and first quarter of 2022, MassBenchmarks analysts said it expects the Massachusetts economy to grow at a 4.5 percent annual rate, less optimistic than they were this summer but “consistent with continued gradual progress in getting back to normal and assuming there is no seasonal COVID-19 surge as temperatures drop.”
