Washington – There are bright spots in Connecticut’s sluggish economy, even as Connecticut’s key manufacturing sector has lagged, a recent federal report says.

Those bright spots include healthcare, finance and professional services like information technology, the Commerce Department’s Bureau of Economic Analysis says.

The BEA’s  preliminary analysis of the state gross domestic product (GDP), an economic measurement of growth, shows that the Connecticut’s economy grew an anemic 0.6 percent in 2014. The national average was 2.2 percent, up from 1.9 percent in 2013.

The BEA also revised the economic growth rates of the state in 2012 and 2013.

For 2012, GDP was revised downwards, from 1 percent to 0.3 percent. For 2013, Connecticut’s economic growth was revised upward slightly, from 0.9 percent to 1 percent.

The federal government routinely updates economic data as more information becomes available or methodologies change. In this case, the BEA revised its GDP number for Connecticut — and every state in the nation — “because previous information that was not available became available,” said BEA spokeswoman Jeannine Aversa.

New information that drove the revisions included the Census Bureau’s Economic Census of Manufacturing for 2012 and the Census Bureau’s Annual Survey of Manufactures for 2013.

BEA economist Clifford Woodruff said these census reports were behind Connecticut’s drop in GDP in 2012, as was a national downward revision of the broadcasting and telecommunications sector.

Pat Flaherty, an economist with the Connecticut Department of Labor, has a different view of the performance of the state’s economy. He says it has grown year over year since it bottomed out during the recession and questions the BEA’s 2012 revision. The year before, the agency had increased the state’s GDP for that year in a revision.

“It is difficult to speculate the GDP for a state,” Flaherty said. “All estimates are subject to error.”

Even so, Flaherty said, “The state has no official position on the BEA GDP figures.”

Connecticut does not measure its GDP, leaving that task to the federal government.

The BEA report said the manufacturing of durable goods, an important part of Connecticut’s $250 billion-plus economy, fell slightly from 2013 to 2014, from $19.4 billion in output to $18.7 billion. Total manufacturing in Connecticut in 2014 was $27 billion, down slightly from $27.8 billion in 2013.

Much of the state’s sizable defense industry falls into that sector.

Yet Flaherty said he does not believe Connecticut’s manufacturing industry is shrinking.

“It’s hard to believe that the output in manufacturing has actually decreased,” he said.

Instead, Flaherty believes the BEA reclassified some types of manufacturing activity, shifting it to a research and development category.

“It’s the same activity happening, they’re just putting it in a different class,” Flaherty said.

Research and development activity is included by the BEA in “Professional, Scientific, and Technical Services” a sector that has grown steadily in Connecticut.

Other growing sectors in the state include financial services, insurance and health care services.

Flaherty said an aging population in Connecticut has resulted in an increased demand for health care services, as has the Affordable Care Act’s expansion of health insurance coverage in the state.

Peter Gioia, vice president and economist at the Connecticut Business & Industry Association, said he “was not shocked” the BEA determined manufacturing in the state has slipped, faulting a strong U.S. dollar that hurt some exports and the sluggish Connecticut economy as a whole.

“We have been lagging the country,” he said.

He expects a turnaround in Connecticut’s manufacturing sector this year, led by growth in aerospace and defense.

“I think there’s going to be a change (in the GDP) in 2015,” Gioia said, citing increased spending by the Pentagon on Connecticut-made weapons systems and a boost in  commercial sales.

But it’s hard to predict what the Connecticut economy will do.

Fred Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut, sharply revised downward an optimistic projection of the state’s economy based in part on the BEA’s revised GDP data.

He said Connecticut is hampered by having to rely on federal economic data, which can lag one to three years behind, and “no capacity to cross-check the federal data with state data.”

“The core problem is that Connecticut, unlike many states, has absolutely nothing in place to track its own performance in real time.  It is, as some say, a data desert,” Carstensen said.

Ana has written about politics and policy in Washington, D.C.. for Gannett, Thompson Reuters and UPI. She was a special correspondent for the Miami Herald, and a regular contributor to The New York TImes, Advertising Age and several other publications. She has also worked in broadcast journalism, for CNN and several local NPR stations. She is a graduate of the University of Maryland School of Journalism.

Leave a comment