Massachusetts squeaked out a smidgen of economic growth in the first quarter of 2023, slowing substantially from its late 2022 growth rate, and analysts are predicting GDP declines in the second and third quarters.
Gross domestic product here rose at a 0.1 percent annualized rate in the first quarter, after rising at a 2.9 percent annualized rate in the final quarter of 2022, according to the new edition of MassBenchmarks, which is published by the University of Massachusetts Amherst Donahue Institute in cooperation with the Federal Reserve Bank of Boston.
Looking ahead, analysts said most of the state’s leading indicators are negative and their index projects state GDP declines of 0.1 percent in the second quarter and 0.6 percent in the third quarter.
U.S. gross domestic product increased at a 1.1 percent rate in the first quarter, according to the U.S. Bureau of Economic Analysis, slowing from a 2.6 percent rate in the fourth quarter. The national outlook suggests “a possible mild recession beginning later this year,” according to MassBenchmarks.
The economic journal’s authors said consumer spending boosted U.S. GDP in the first quarter, but the bulk of it occurred in January and real consumer spending declined in February and March. Spending was “much weaker” in Massachusetts, according to MassBenchmarks, with spending on goods subject to the state’s regular sales tax and motor vehicle sales tax declining at a seasonally adjusted 5.8 percent annual rate in the first quarter, “with growth in spending on motor vehicles more than offset by declines in spending on other goods.”
Payroll employment in Massachusetts “remained strong,” in the first quarter, expanding at an annual rate of 3 percent, compared to 2.7 percent nationally.
“Wage and salary income, seasonally adjusted and estimated from state withholding taxes, declined at a 7.3 percent annual rate in the first quarter, as compared to a 6.4 percent rate of growth for the U.S.,” MassBenchmarks reported. “In the fourth quarter of last year, wage and salary income grew at 7.0 percent rate in the state and a 6.8 percent rate nationwide according to the BEA.”
State budget officials say they have factored slowing growth into their spending calculations, although April collections pushed state tax collections well below the benchmarks they used to build the fiscal 2023 state budget and raised questions about whether their fiscal 2024 assumptions will hold up.