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STATE ECONOMIC GROWTH WIDESPREAD IN 2006
Advance 2006 and Revised 2003-2005 GDP-by-State Estimates

Newly available data on the state distribution of real GDP growth confirm that economic growth was widespread in 2006, as GDP grew in all states except Michigan, according to estimates released today by the U.S. Bureau of Economic Analysis./1 Growth accelerated for the nation and most states compared with 2005. The ten fastest-growing states are all in three western regions—Rocky Mountain, Southwest or Far West.

This release provides NAICS-sector estimates only 6 months after the calendar year for the first time—a 4–month acceleration from previous release schedules./2 It completes the acceleration of the GDP-by-state estimates.

Highlights for 2006

• The U.S. growth in real GDP by state was faster than the 1997-2005 average annual rate; six of the eight BEA regions experienced faster growth as well (chart 2).
• Growth in the private services-producing sector was strong in nearly all states and continued to account for most growth.
• Four of the fastest-growing states—Arizona, Idaho, Utah, and Washington—were also among the fastest-growing states in 2005.
• Delaware had the highest per capita real GDP. The five states with the highest per capita real GDP are all in two eastern regions—New England or Mideast.

NAICS–Sector Growth in 2006

The private services-producing sector continued to account for most of the growth both nationally and regionally in 2006./3 The real estate, rental, and leasing sector was the largest contributor to growth in all BEA regions except the Southwest. Additionally, this sector was the largest contributor to growth for 23 states and the District of Columbia.

Growth in the private services-producing sector was strong in nearly all states; the fastest-growing states tended to be those with strong growth in the private goods-producing sector as well./4 Idaho had the fastest growth of all states in 2006 (7.4 percent), with the durable goods manufacturing sector accounting for 31 percent of the growth. For the fastest–growing states of New Mexico, Oregon, and Texas, durable goods manufacturing accounted for more than 20 percent of growth. For Oklahoma, another of the fastest–growing states, mining accounted for 31 percent of growth. Michigan was the only state to decline in 2006 (–0.5 percent) due to declines in many sectors, particularly construction.

Per Capita Real GDP by State for 2006

Delaware led the nation with the highest per capita real GDP of $59,288. This is 57 percent above the national average. Delaware's ranking can be tied to its large concentration in the finance and insurance sector, a highly capitalized sector in this state. The second highest–ranked state was Connecticut at 33 percent above the national average. The top ten states were all ranked in the top ten in 2005, although several states traded places.

Mississippi's per capita real GDP by state of $24,062 was the lowest in the nation. This is 36 percent below the national average. The bottom ten states were all ranked in the bottom ten in 2005, although several states traded places.

Revisions to the Estimates for 2003–2005

Overall, the revisions had a moderate impact on relative growth across states. The first–time accelerated industry estimates for 2005, released October 26, 2006, indicated successfully whether a state's growth was high or low (relative to national growth) for nearly 80 percent of the states.

For 2003–2005, the annual revisions to percent change were less than or equal to three percentage points, in absolute terms. Many of the revisions were less than one percentage point.

The revisions to the GDP–by–state estimates for 2003–2005 incorporate new data from the U.S. Census Bureau, specifically the Annual Survey of Manufactures (ASM) for 2005 and the State and Local Government Finance data for 2004. These estimates also incorporate the annual revision to BEA's GDP–by–industry estimates released April 24, 2007 and state personal income estimates for 2003–2005 released March 27, 2007.

Tables 1–5 show these results in more detail; complete detail is available on BEA's Web site at www.bea.gov.

Advance Estimates of GDP by State for 2006 by NAICS Sector

The 2006 advance estimates are based primarily on preliminary earnings by industry estimates from BEA's regional economic accounts released March 27, 2007 and on the advance GDP–by–industry estimates from BEA's annual industry accounts released April 24, 2007. For the agriculture, forestry, fishing, and hunting and mining industries, research performed over the past year showed that, by incorporating alternative data sources, the accuracy of the advance estimates for these two industries was significantly improved. Hence, preliminary farm sector cash receipts data from the U.S. Department of Agriculture are incorporated in the agriculture, forestry, fishing, and hunting estimates; and preliminary value of production and price data from the U.S. Department of the Interior and the U.S. Department of Energy are incorporated in the mining estimates.

More information on the methodology used to produce the advance 2006 estimates, on the regular (revised) GDP–by–state estimates for 2003–2005, and on revisions to the GDP–by–state estimates will appear in an article in the July 2007 issue of the Survey of Current Business, BEA's monthly journal.

Definitions

GDP by state is the state counterpart of the Nation's gross domestic product (GDP), the Bureau's featured and most comprehensive measure of U.S. economic activity. GDP by state is derived as the sum of the GDP originating in all the industries in the state.

Real GDP by state is an inflation–adjusted measure based on national prices for the goods and services produced within that state. The estimates of real GDP by state and of quantity indexes with a base year of 2000 were derived by applying national implicit price deflators to the current–dollar GDP–by–state estimates for the 64 detailed NAICS–based industries for years 1997 forward and for the 63 detailed SIC–based industries for years 1977–1997. Then, the chain–type index formula that is used in the national accounts is used to calculate the estimates of total real GDP by state and of real GDP by state at more aggregated industry levels.

The relation of GDP by state to U.S. Gross Domestic Product (GDP)

An industry's GDP by state, or its value added, in practice, is calculated as the sum of incomes earned by labor and capital and the costs incurred in the production of goods and services. That is, it includes the wages and salaries that workers earn, the income earned by individual or joint entrepreneurs as well as by corporations, and business taxes such as sales, property, and Federal excise taxes–that count as a business expense.

GDP is calculated as the sum of what consumers, businesses, and government spend on final goods and services, plus investment and net foreign trade. In theory, incomes earned should equal what is spent, but due to different data sources, income earned, usually referred to as gross domestic income (GDI), does not always equal what is spent (GDP). The difference is referred to as the "statistical discrepancy."

Starting with the 2004 comprehensive revision, BEA's annual industry accounts and its GDP–by–state accounts allocate the statistical discrepancy across all private–sector industries. Therefore, GDP–by–state estimates are now conceptually more similar to GDP estimates in the national accounts than they had been in the past.

Except for small differences resulting from the GDP–by–state accounts excluding Federal military and civilian activity located overseas (because it cannot be attributed to a particular state), U.S. growth rates of real GDP by state are nearly identical to GDP–by–industry growth rates when these were originally published in December 2006. The GDP–by–industry growth rates are identical to those from the annual revision of the national income and product accounts (NIPAs) released in July 2006. Due to revisions since July 2006, the national rates of GDP growth in the NIPAs may differ from the U.S. growth rates of real GDP by state.

¹See the "Advance Estimates of GDP by State for 2006 by NAICS Sector" section of this release for a detailed description of these estimates.
²NAICS North American Industry Classification System. NAICS sectors comprise the highest level of aggregation of the system and represent general categories of economic activities.
³ The private services–producing sector consists of utilities; wholesale trade; retail trade; transportation and warehousing, excluding Postal Service; information; finance and insurance; real estate, rental, and leasing; professional and technical services; management of companies; administrative and waste services; educational services; health care and social assistance; arts, entertainment, and recreation; accommodation and food services; and other services, except government.
⁴ The private goods–producing sector consists of agriculture, forestry, fishing, and hunting; mining; construction; and manufacturing.