Mass Economy Has Strong First Quarter
Major state economic growth indicators performed well in the first quarter, according to the MassBenchmarks Current Economic Index released Friday by the UMass Donahue Institute and the Federal Reserve Bank of Boston, leading to a forecasted economic growth rate of 3.5 percent over the next six months.
That's up from 2.9 percent in March 2012, according to MassBenchmarks, which attributed quarterly growth to gains in employment, income and spending. Economic output in for the first quarter grew at an annual rate of 3.9 percent, compared with a national growth rate of 2.5 percent.
Payroll employment in the first quarter grew at an annual rate of 2.9 percent, while wage and salary income grew at a "stunning" 19.9 annual rate, according to MassBenchmarks, which was likely due to bonus payments made to those employed in the financial and professional services sectors. Spending on items subject to taxation was also robust, according to MassBenchmarks, growing at an annual rate of 11.6 percent.
But the recent growth is unlikely to continue in the second quarter, according to MassBenchmarks, as payroll employment declined in March, and withholding and sales tax revenues were weaker than expected.
Alan Clayton-Matthews, the senior contributing editor for MassBenchmarks, said two opposing forces are strongly influencing both the state and national economies, creating mixed results.
"On the one hand, growth in consumer demand is being supported by rising home prices, stock markets and job expansion," Clayton-Matthews said. "On the other hand, fiscal drag in the form of the payroll tax increase and federal budget cuts are slowing the economy. This fiscal drag could dampen growth by as much as 1.5 to 2.0 percentage points this year. And the continuing recession in Europe and an apparent slowdown in China are not helping matters," he said.
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