Massachusetts Economy Growing Faster than the Nation

As the weather gets hotter, people begin leaving for vacations and the pace of life tends to slow a bit. Businesses often realize a similar decrease in activity during this period. A study recently released by the University of Massachusetts showed that the Massachusetts’ economy grew by a solid 6.4% last quarter, but also predicted that quarter three, which ends in September, may not be as promising. (Image courtesy: http://bit.ly/bnKgdG)

The state’s second quarter growth rate was 3.1% higher than the first quarter. The report cited such reasons as “early spring jobs growth, income gains, and sales increases within the technology sector” as the primary reasons for the state’s strong second quarter growth. Nationally, the economy grew only 2.4% last quarter, or less than half of Massachusetts’ growth rate.

Two technology sector companies within the state that performed particularly well last quarter were Teradyne Inc. and EMC Corp. Based in North Reading, Teradyne reported a revenue increase of 170%, as compared to quarter two in 2009. Hoplinkton’s EMC Corp, reported a revenue increase of 24% and a 200% increase in profits, as compared to last year.

Professor of economics at Northeastern Univerisity, Alan Clayton-Matthews, explained that this recent expansion was the “fastest quarterly growth since the third quarter of 1984, at the height of the ‘Massachusetts Miracle’ expansion.”

However, Robert Nakosteen, professor of economics at UMass Isenberg School of Management, cautioned that, “Up until now, government spending has played a much greater role in stimulating growth and encouraging consumer spending than in past cycles.” Nakosteen went on to warn that “the government stimulus is waning, and it is far from certain that private sector spending will take up the slack.” (Image courtesy: http://bit.ly/cJY0Fo)

Moving forward, most economists expect the state’s growth rate to decrease along with that of the nation overall. The financial crisis in Europe, high unemployment rates, and expiring federal stimulus packages are all expected to drag down growth rates. For the remaining two quarters, Massachusetts is expected to show around 4% growth, while the national growth rate may drop as low as 1% going forward.

Mark Vitner, senior economist at Wells Fargo & Co. in Charlotte, N.C., said it is unlikely that congress will approve further stimulus packages. “We’re going to see how capable the economy is of standing on its own in the second half of the year,’’ Vitner commented.

Although a decrease in growth seems to be inevitable, still Massachusetts continues to substantially out-perform the nation. This is generally accepted as good news, however, long term, the state cannot hope to continue to see such great success unless the nation begins to keep pace. When the country as a whole is showing 6.4% growth, everyone will have reason to be happy.

[Sources: http://bit.ly/dx7nj1, http://bit.ly/c1eJDd, http://bit.ly/bDEqcH]