Thursday, July 28, 2016

What's driving that 3.9 percent state GDP growth? Rice, says federal analyst

Posted By on Thu, Jul 28, 2016 at 3:39 PM

click to enlarge TOP OF THE CLASS: Arkansas's GDP stands out because of rice production, analysts say. - U.S. BEA
  • U.S. BEA
  • TOP OF THE CLASS: Arkansas's GDP stands out because of rice production, analysts say.

Yesterday, a federal report was released showing Arkansas's growth in gross domestic product outpaced that of every other state in the nation in the first quarter of 2016: The state's GDP grew at 3.9 percent in the first three months of the year, according to the U.S. Bureau of Economic Analysis.

The majority of that rise was due to a boost in agricultural output, the BEA report said — 2.21 percentage points out of the total 3.9 percent rise.

In a story in the Democrat-Gazette this morning, reporter Brian Fanney raised some warranted skepticism about those ag numbers by talking to in-state experts. He spoke with the chief economist at the Arkansas Farm Bureau and a professor of agricultural economics at the University of Arkansas. Both expressed surprise about the BEA's figures and said they weren't sure where exactly that agricultural growth could be coming from. Forestry might account for some growth, suggested a professor at the the Arkansas Forest Resources Center, but it's not clear it would explain the overall surge.

I placed a call to the BEA this morning asking for more details on the report. This afternoon, I got a response from Thomas Dail, a spokesperson at the bureau:
We spoke earlier today. I tracked down the answer to your question on which sector was driving the 2.21 percentage point contribution to the 3.9 percent increase in state GDP for Arkansas: forestry, crops, livestock or something else?

Here it is:

Much of the increase in agriculture, forestry, fishing and hunting is coming from crop output. As you know, Arkansas is the top-ranked state for rice production. Nationwide, USDA is projecting rice cash receipts (sales) to increase 32% in 2016 after falling sharply in 2015. Our real state GDP data are adjusted for changes in prices. So if even if commodity prices fall, our GDP numbers reflect the higher crop output.
There you go. Now who's eating all that rice?

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