New England Gross Domestic Product was $955bn in 2015
New England Gross Domestic Product (GDP) increased to $955bn in 2015, up from $491bn in 1997, a 94% increase over the eighteen years. The government sector contributed 11% to GDP in 2015, with the private sector contributing 89%, 75% in services and 14% in goods. In dollar terms services GDP was $714bn, goods was $133bn and the government sector GDP was $109bn in 2015.
New England contributed 5.3% to the national economy in 2015 down from 5.8% in 1997.
New England Gross Domestic Product compound annual growth rate was 3.8%p.a.
The compound annual growth rate (CAGR) for New England Gross Domestic Product of 3.8%p.a. from 1997 to 2015 (USA 4.2%) was ranked 7th compared to all other regions; only the Great Lakes regional growth of 3.3%p.a. was lower.
The poor performance relative to the other regions is evident in all three sectors. New England region services sector CAGR of 4.2%p.a. (USA 4.5%) and government sector CAGR of 3.8%p.a. (USA 4.1%p.a.) ranked 7th of eight regions while the goods producing sector ranked 8th with a GDP CAGR of 1.8%p.a. (USA 3.2%).
Greater insights into the momentum behind the New England regional economy are revealed when the CAGR% are calculated for the three very distinctive periods in the 1997 to 2015 time period, namely:
1997 to 2007: The Pre-Recession Years
2008 to 2009: The Great Recession Years
2010 to 2015: The Post-Recession Years
Gross Domestic Product grew by 5%p.a. prior to the recession
In the pre-recession period New England GDP grew by 5%p.a. for 10 years compared to 5.4%p.a. nationally. The services sector grew by 5.3%p.a. (USA 5.6%), the government sector by 5.2%p.a. (USA 5.3%) and the good-producing sector by 3.6%p.a (USA 4.6%). All three are below the national average and so New England ranked 5th of 8 regions for GDP growth from 1997 to 2007.
During the Great Recession years however, New England’s economy coped better than most and ranked 3rd for GDP growth. The two highest ranked were the Mideast and Plains regions and all three of these regions were under-performers in the pre-recession period of 1997 to 2007.
New England Gross Domestic Product increased by 0.4%p.a. in the 2008 to 2009 period compared to a decline of 0.2%p.a. nationally, but when you drill down to the impact of the recession on the services sector compared to the goods-producing sector, the difference could not be starker.
The services sector grew by 1.8%p.a. (USA 0.4%p.a.) in 2008 and 2009, the highest growth rate in any region. In contrast the goods-producing sector fell by 7.2%p.a. (USA declined 5%p.a.), a decline only exceeded in the Southwest and Great Lakes regions. On top of that the 2.6%p.a. (USA 4%) increase in the government sector was the lowest of all regions in this period.
The Federal Bailout of the finance sector helped the New England Gross Domestic Product to grow in 2008 to 2009
The reason for the improved service sector performance was the bailout of the finance and insurance sector during the Great Recession to such an extent that the sector never actually suffered a recession itself, growing as it did by 9.5% in Real GDP terms  from 2007 Q4, to 2009 Q2, the official period of the Great Recession. In New England it grew by 11.5% in the same period.
During the post-recession period it was the New England economy that under-performed every other region. It grew by 2.9%p.a. compared to 3.8%p.a. nationally. The private sector, both in services and goods, ranked 8th compared to all other regions, as the former grew by 3.2%p.a. (USA 4.2%p.a.) and the latter sector by 2%p.a. (USA 3.7%). The government sector grew by 2.1%p.a. (USA 2.0%) which was above the national average but this still ranked 6th compared to the other regions.
The Service Sector share of New England Gross Domestic Product was 74.7% in 2015
In conclusion the New England economy is very reliant on the service sector which made up 74.7% of GDP in 2015 compared to 69% nationally. The goods-producing sector of New England’s economy was very badly hit during the recession period and has not recovered post-recession. In Real GDP terms the goods sector has only grown by 0.2%p.a. post-recession after falling by 9.5%p.a. during the recession period.
Gross Domestic Product in the New England region may have grown by 94% from 1997 to 2015, but this lags the national growth rate of 110% and is well below the 150% growth enjoyed in the Southwest region. Worse still, the gap is widening post-recession as New England’s growth is the lowest of all. Detailed analysis by state and industry in upcoming posts will reveal more about this.
To see the same posts for the other regions, here are the links
Gross Domestic Product data is sourced from the Bureau of Economic Analysis (BEA) and is up to date as of June 20th 2017.
