When Indexed for Inflation, Massachusetts Economy Shrunk in 2011

“The old number feels like the better description of what’s really happening in the Massachusetts economy,” based on other economic indicators, including gross domestic product growth, export growth, tourism, and payroll withholding tax growth, said Gregory Bialecki, secretary of housing and economic development.- Boston.com

Yesterday, the University of Massachusetts revised their estimate of Massachusetts Economic growth, in 2011, downward.  

The Massachusetts economy last year grew at a significantly slower pace than originally thought, expanding at roughly the same rate as the rest of the nation last year, the University of Massachusetts reported Wednesday.

Forecasters now believe the state’s economy grew at an annual rate of 1.8 percent in 2011, instead of the 2.9 percent first reported in UMass’s quarterly journal MassBenchmarks.

Inflation on the other hand picked up steam in 2011.  According to the Bureau of Labor Statistics the average CPI in 2011 was 224.9 vs 218.1 in 2010 this is an inflationary rate of 3.1% nationally well above the forecasted GDP growth rate.  The Boston CPI showed a similar inflationary increase.  The 2011 average CPI-U for Boston was 243.9 vs. 237.4 in 2010.  This is an inflationary rate of 2.7% local inflation rate.

Using national gross domestic product (GDP) and Massachusetts gross state product (GSP) data from the Bureau of Economic Analysis, a chart of GDP vs GSP growth since 2000 was created (shown below).  The national GDP was indexed to 2000 USD using the national CPI.  The state GSP was indexed to 2000 USD using the CPI-U for Boston.

The Bureau of Economic Analysis only has final GDP and GSP numbers up to 2010.  Estimates were used for 2011 numbers.  The estimate for GDP was taken from a quarterly release of the Bureau of Economic Analysis.  The estimate for GSP was taken from the University of Massachusetts revised estimate shown above.  

Yet another measure that the administration is basing their “growth” claims on tells a different story.  It’s time the Patrick Administration sees the light.

About Rob "EaBo Clipper" Eno