UMass: State economy slowed at end of 2011
The Massachusetts economy slowed at the end of 2011 as demand for information technology products declined and businesses moderated hiring after a spurt earlier in the year, the University of Massachusetts reported today.
Forecasters, however, said improving consumer confidence, increased consumer spending, and rising stock prices for leading Massachusetts companies suggest the slowdown may be short-lived. The state’s economy also slowed at the end of 2010, only to rebound strongly in the first half of last year.
These “are all encouraging signs that the recovery underway can maintain its momentum,’’ said Martin Romitti, director of economic and public policy research at the UMass Donahue Institute.
UMass, in its quarterly journal MassBenchmarks, reported that the state’s economy grew at at 2.3 percent annual rate in the fourth quarter of 2011, down from 3.2 percent in the third. The US economy expanded at a 2.8 percent annual rate in the fourth quarter, up from 1.8 percent in the third.
It is the first time in a year that the US economy outpaced the state’s. In general, Massachusetts has recovered from the recession faster than the nation, in large part because the state’s economy is driven by its technology sector and business spending.
Global demand for technology and strong business spending on equipment and software helped drive a burst growth in the first half of 2011, as the state added 40,000 jobs. Hiring was flat in the second half as demand for information technology products peaked.
“To the extent that businesses accelerated their hiring during the first half of the year, they may have shifted employment and income growth [away] from the second half,’’ said Alan Clayton-Matthews, a Northeastern University economics professor who analyzed data for the UMass report.
The report forecasts the economic growth will accelerate in the first half of this year, to a 4 percent annual rate by the second quarter.
The state and national economies, however, still face significant risks, including the debt crisis in Europe, mounting federal deficits in the United States, still high unemployment, and struggling housing markets, the report said. The European debt crisis, which threatens to push the continent back into recession, may already be weighing on the state’s economy, slowing sales technology, pharmaceuticals and other Massachusetts products in those markets.
Europe accounts for about 40 percent of the state’s exports.
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