October 30, 2009 | last updated March 24, 2012 6:29 pm

State Economy Shrinks In Q3

The Massachusetts economy shrank at a 1.1 percent annualized rate during the third quarter of this year, compared to a 3.5 percent expansion of the national economy during the same time period.

Massachusetts economists credit the national growth to one-time incentive programs, such as Cash for Clunkers and the first-time homebuyer tax credit. Those incentives disproportionately benefited states other than Massachusetts that rely more heavily on auto manufacturing or have experienced a more severe housing decline.

MassBenchmarks, of the University of Massachusetts Donahue Institute, released the economic data in conjunction with the Federal Reserve Bank of Boston.

While the state's economy may have receded in the past three months, forecasters expect growth in the next six months at a rate of 0.5 percent through March 2010. Modest gains in the residential real estate market, coupled with a turnaround in the national and international information technology markets are promising signs, while concerns in the labor market and weak consumer spending make the future outlook uncertain.

The Massachusetts economy declined at a 2 percent annualized rate in the second quarter of this year, compared to a 0.7 percent national decline during the same period. In the first quarter, the state economy shrank at a 4.4 percent rate compared to a 6.4 percent national annualized rate.

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