State’s economy slows as US growth picks up

Massachusetts’ economic growth slowed significantly over the summer while the nation showed a modest pick-up, according to two reports released Friday.

The diverging trajectories highlight the difference between the consumer-driven US economy and the Massachusetts economy, which is more dependent on business spending. Nationally consumer spending increased solidly while overall business investment declined.

The state’s economic fell to a 1.9 percent annual rate between July and September, down from 3.0 percent in the preceding three months, the University of Massachusetts reported. The U.S. economy grew at a 2.0 percent annual rate during the same period, an improvement over the spring’s slow 1.3 percent rate of growth, the US Commerce Department reported.


Robert Nakosteen, an economist at the University of Massachusetts and executive editor of the report, produced by the UMass Donahue Institute and Federal Reserve Bank of Boston, described Massachusetts’ pace of growth as “not very heartwarming.’’

“Business spending on high tech goods and services after the recession lined this state up to come out of the recession more quickly, but that would only continue if the nation and the global recoveries gained,’’ Nakosteen said. “It’s been slow and painful and globally, if anything, it’s taken a turn for the worse.’’

As a result, the state’s economy has slowed sharply in recent months. The Massachusetts unemployment rate increased by half a percentage point over the past three months,to 6.5 percent in September from 6 percent in June.

Spending on cars and other taxable goods in Massachusetts declined by about 1.5 percent during the same period, according to the report’s analysis of state sales tax data.

Northeastern University economist Alan Clayton-Matthews, who compiled the data for the report, said the state’s economic growth should pick up modestly over the next six month to an annual rate of 2.3 percent — but not enough to generate significant job gains. He said he expected “virtually no net employment growth in Massachusetts over the next six months.’’


“It looks like slow growth for the country and the region,’’ Clayton-Matthews said.

The slowdown has occurred primarily in the technology and information sector, a key part of the state’s economy. That sector remained strong after the recession because many businesses both nationally and internationally continued to buy goods, such as semiconductors and semiconductor equipment, made in Massachusetts.

With a global slowdown affecting sales in Europe and China, Massachusetts is feeling the pinch. State merchandise exports in the first eight months of the year were down 5.9 percent compared to the same period last year.

Clayton-Matthews said semiconductor sales are down from a year ago and information technology investment is “essentially flat,’’ he said.

“As the nation and world economies improve, we should see business investment and consumer demand for technology products start to grow again,’ he said. “I see this as a slow down in the medium term.’’

The economic statistics are subject to revisions.For example, the second quarter U.S. numbers were recently revised downward from a 1.3 percent growth rate from an earlier estimate of 1.7 percent.

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