Rhode Island's Economy Continues Slowdown in the First Quarter of 2015

Rhode Island Public Expenditures Council

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Rhode Island's Economy Continues Slowdown in the First Quarter of 2015

PROVIDENCE, R.I. (June 2015) – According to the Rhode Island Current Economic Indicator (CEI) briefing released today by the Center for Global and Regional Economic Studies and the Rhode Island Public Expenditure Council (RIPEC), Rhode Island’s economy experienced positive growth in the first quarter of 2015, but is showing continued signs of weakness. The state’s economy grew by an annual rate of 1.7 percent in the fourth quarter of 2014 and by 1.5 percent in the first quarter of 2015. Growth is projected to continue into the second quarter of 2015, as the Leading Economic Indicator projects an expansion of 1.6 percent. The state’s economy had previously been projected to expand by 2.0 percent in the first quarter of 2015. A copy of the full briefing is available here.

The U.S. Gross Domestic Product (GDP) decreased at an annualized rate of 0.7 percent in the first quarter of 2015, compared to an increase of 2.2 percent in the fourth quarter of 2014. The Regional Current Economic Indicator indicates that the New England economy grew at an annualized rate of 1.8 percent in the first quarter, compared to 2.7 percent in the fourth quarter of 2014. Rhode Island’s economy has now grown at a slower rate than the regional economy in the last two quarters.
Rhode Island’s slower economic growth in the first quarter was largely the result of mixed performance on the eleven CEI indicators that measure internal state economic activity. Just five of these eleven indicators experienced positive growth in the first quarter. Among the indicators contributing negative growth to the CEI were trade, transportation, and utilities employment, information services employment, and professional and business services employment.

Although the overall picture was mixed, some industry sectors performed well in the first quarter of 2015. Manufacturing employment increased by 4.3 percent, continuing a year-long trend of positive job growth. In addition, construction employment increased by 2.5 percent, reversing two consecutive quarters of job losses. Finally, leisure and hospitality employment and education and health services employment also posted positive job growth in the first quarter.

Real wage and salary disbursements increased at an annualized rate of 3.3 percent in the first quarter, suggesting that employees are beginning to receive higher compensation. However, general sales and gross receipt taxes, which is a proxy for aggregate demand in the state, decreased by 1.7 percent in the first quarter. This suggests a mixed picture in terms of consumer spending and it is unclear how this will impact the job market moving forward.

“Rhode Island’s economy followed the national economy and experienced a slowdown in the first quarter of the year,” remarked John C. Simmons, Executive Director of RIPEC.  Simmons added, “It remains unclear whether the tide will change nationally or in Rhode Island so that the economic expansion resumes. What does appear to be clear is that the Rhode Island economy weakened at the start of this year and the projection for the near future is not as robust as was earlier anticipated.”

The quarterly CEI, developed by economists at The Center for Global and Regional Economic Studies at Bryant University, combines several key gauges of economic activity in a single statistic that measures the overall current economic conditions in Rhode Island. It is calibrated to grow at the rate of the Real Gross State Product and, therefore, can be interpreted as the underlying growth rate of the state economy. The CEI is calculated using the most current available data for the state.

For additional information about the RI CEI or the newsletter, contact Edinaldo Tebaldi, associate professor of economics at Bryant University, at etebaldi@bryant.edu.