Institute for Economic Advancement

Arkansas Exports up 36% in 2012

By , February 27, 2013 8:05 AM

The Commerce Department announced yesterday that 35 states saw merchandise export growth in 2012, and that Arkansas had the second-highest growth rate in the nation.  Total Arkansas exports were $7.6 billion, representing an increase of 36% from 2011 (second only to New Mexico’s 42% growth rate).  During the recession, exports from Arkansas did not decline as sharply as the national total, but had been slower to recover in 2010 and 2011.  The sharp increase in 2012 vaulted Arkansas exports well above the U.S. gain since the export peak of 2008.

Source: Foreign Trade Division, U.S. Census Bureau.

Arkansas’ largest export category in 2012 was Transportation Equipment, comprising 28% of the state’s total.  (Within this category, the state’s leading export is “Civilian Airplanes, Engines and Parts,” but “Graders and Levelers” has also been a recent large contributor.)  After Transportation Equipment, Arkansas’ next-highest export categories are Chemicals and Food Manufactures.  These top three categories accounted for about half of the state’s total value of exports.

Source: Foreign Trade Division, U.S. Census Bureau.

One factor that contributes to a relatively high variability in Arkansas exports is the fact that transportation equipment is such a large component.  This tends to be a “lumpy” category of export goods:  for example, aircraft shipments occur infrequently but in large dollar volumes.  In fact, aircraft exports have even been known to temporarily distort national trade statistics at times (see, here, for example).

As shown in the figure below, the Transportation Equipment component has indeed been a volatile component of Arkansas exports.  In 2012, shipments of Transportation Equipment accounted for approximately two-thirds of Arkansas’ total export growth.  Consequently, the sharp rate of increase in total Arkansas exports in 2012 can be ascribed, at least in part, to the relatively low level of Transportation Equipment exports in 2011.  This observation is not intended to diminish the good news that exports expanded in 2012, but to caution that the particularly high rate of export growth that Arkansas experienced in 2012 is likely to be a transitory phenomenon.

Source: Foreign Trade Division, U.S. Census Bureau.

Arkansas House Prices in 2012

By , February 26, 2013 3:52 PM

More evidence came out today suggesting that home prices have bottomed-out and are moving tentatively higher.  The new data from the Federal Housing Finance Agency (FHFA) — covering the fourth quarter of 2012 — show upward momentum in prices both nationwide and here in Arkansas.  As shown in the chart below, the FHFA “Purchase-Only Index” for Arkansas held relatively steady over the second half of the year, but ended the year about 2.3% higher than the fourth quarter of 2011.  The corresponding measure for the U.S. continues to increase steadily, rising 5.5% over the course of 2012.

Source: Federal Housing Finance Agency

The FHFA home price indexes are constructed using sales price information from all mortgages processed by FannieMae and FreddieMac.  In order to expand the coverage to include other mortgages, the FHFA has recently introduced an “Expanded Index” that also includes information from county recorder offices.  The latest information from this data series presents an even clearer picture of recent house price appreciation.  In the fourth quarter, the expanded index data shows prices up 1.4% in Arkansas and up 1.6% for the U.S.  Compared to the fourth quarter of 2011, prices were up 5.7% in Arkansas and 5.5% nationwide.

Source: Federal Housing Finance Agency

In order to accumulate enough sales-price data to provide reliable indicators for metro-area home prices, the FHFA also constructs a set of “All Transactions” indexes that include information from actual home sales as well as refinancing appraisals.   As detailed in the table below, home prices have recently been on the increase in almost all of the state’s metro areas.

Source: Federal Housing Finance Agency

There is one exception to the recent trend:  Home prices in Hot Springs have continued to decline over the second half of 2012.  It is notable, however, that the housing market in Hot Springs remained strong well after home prices began to decline nearly everywhere else in the nation. That is, patterns in house prices in Hot Springs appear to be lagging behind the state and national trends.  As shown in the chart below, home prices in Hot Springs have fallen by about 4.4% since the beginning of 2007 — the same rate of decline as the statewide average.

Source: Federal Housing Finance Agency

The metro-area chart also shows a wide divergence over longer-term house-price changes.  Prices in Fayetteville and Memphis remain well-below their previous peaks, while many of the metro areas have seen relatively little net change in prices over the past 5 to 6 years.  At the other extreme, house prices in Texarkana were barely affected by the general decline in prices over the past several years.

Arkansas Home Sales in 2012 – Zero Growth

By , February 26, 2013 8:30 AM

The Arkansas Realtors® Association (ARA) released new home sales data yesterday, covering the final two months of 2012.  November sales were up 6.6% from the previous year, while December sales were down 6.2%.  For the two-month average, home sales were essentially flat (+0.1%) compared to the same period in 2011.  The chart below shows that Arkansas home sales in 2012 were a repeat of the 2011 experience:  a typical seasonal pattern with no apparent change in trend.  In fact, the annual figures from the ARA show that sales in 2012 were down 1.1% for the year as a whole.

Source: Arkansas Realtors® Association

After seasonally adjusting the data to statistically remove recurring annual patterns, the flat-line for Arkansas home sales becomes even more evident.  In the figures below, seasonally-adjusted data are displayed for the monthly sales data and for quarterly totals.  Both charts illustrate the absence of any discernible trend over the past two years.

Sources: Arkansas Realtors® Association, Institute for Economic Advancement

Sources: Arkansas Realtors® Association, Institute for Economic Advancement

The release of sales data for November and December was, in some sense, anticlimactic — the final two months are typically among the slowest sales months of the year, so there was little chance of a substantial year-end surprise.  Sales during the peak summer months of 2012 had already shown that annual totals would be little-changed from the previous year.

Looking ahead to 2013, there are reasons to be cautiously optimistic:  Financing rates remain at all-time lows, home prices have appear to have bottomed-out, and general economic conditions continue to improve (albeit slowly).  Foreclosures and distressed sales will continue to be a negative factor, since foreclosures add to available inventory and tend to put downward pressure on prices.  Nevertheless, this is likely to be less of a drag on home sales over time as the pace of foreclosure activity continues to slow.  Overall, our forecast for home sales in 2013 remains a modest increase of about 6%.

Metro Area GDP for 2011

By , February 25, 2013 11:49 AM

After a 5-month administrative delay, the U.S. Bureau of Economic Analysis has released new 2011 GDP data for the nation’s metropolitan areas.  The statistics are considered “advance statistics,” subject to considerable future revision.

Nationwide, real (inflation-adjusted) GDP increased in 242 of the nation’s 366 metro areas in 2011, with an overall metro-area growth rate of 1.6%.   Here in Arkansas, growth rates were positive for Hot Springs, Little Rock, Memphis and Texarkana.  The economies of Fort Smith, Jonesboro and Pine Bluff contracted from the previous year, while Northwest Arkansas saw real GDP unchanged from the previous year.  Even among the Arkansas metro areas that expanded, growth rates were generally below the national average (with only Little Rock matching the U.S. average).

The preliminary nature of the “advance” estimates leaves a great deal of uncertainty about the magnitude of the reported growth rates.  Along with current growth rates, the table below also shows revisions to the data from previous years.

Source: Bureau of Economic Analysis

In general, negative growth rates in 2009 were revised downward — indicating that the effects of the recession were more severe than previously reported.  The only Arkansas metro area with a positive growth rate in 2009 was Little Rock; but even this estimate was subject to a substantial downward revision.

In 2010, the newly-revised data generally show higher growth rates than the advance estimates published in September 2011.  Growth in the Fayetteville metro area, in particular, was marked up substantially.  At the other extreme, the new estimates show negative growth for Little Rock in 2010, compared to the small increase that was originally reported.

As demonstrated by the magnitude of the revisions for 2009 and 2010, it is quite likely that the 2011 growth rates will be revised considerably by the time the next metro area GDP report comes out this September.

Arkansas Taxable Sales – 2012:Q4 (Preliminary*)

By , February 7, 2013 2:57 PM

The most recent General Revenue Report  from the Department of Finance and Administration (DF&A) indicated a slight decline in sales and use tax revenue compared to the previous year, but both of the previous months’ reports had shown year-over-year increases.  As a result, preliminary figures for Arkansas Taxable Sales (ATS) for the fourth quarter of 2012 show a rebound after two consecutive quarters of decline.  Fourth quarter taxable sales were up 3% from the previous quarter (seasonally adjusted) and were 0.9% higher than the fourth quarter of 2011.

According to data from the Oil Price Information Service, monthly average gasoline prices in Arkansas declined over the quarter, falling from $3.65 per gallon in September to $3.11 in December.  On a quarterly average basis, , gasoline prices declined from an average of $3.46 in the third quarter to $3.27 in the fourth quarter.  Preliminary information on gasoline sales from DF&A’s Motor Fuels Tax section indicate that fourth quarter sales declined slightly from the third quarter — but less than is typical for that time of year.  So after seasonal adjustment, total gasoline sales were up 2.4%.  Consequently, Arkansas Taxable Sales Including Gasoline (ATSIG) were up 2.9% — nearly the same rate of increase as ATS.

Sources: Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

Sources: Department of Finance and Administration, Oil Price Information Service, Institute for Economic Advancement

The weakness of taxable sales growth during the second and third quarters of 2012 remains somewhat mysterious.  Available data on income and employment in Arkansas did not show notable weakness over that period, but those measures are subject to future revision.  National retail sales statistics showed a decline in the second quarter, but  rebounded in the third quarter.  Regardless of the cause of the mid-year slump, the fourth quarter recovery suggests positive momentum for consumer and business spending going into 2013.

At this point, the fourth quarter data are incomplete.  Final figures on sales and use tax collections are not yet available, nor are the data for gasoline sales in December (the gasoline component of ATSIG in this preliminary report is includes December figures that are derived from model-based estimates).  The data will be updated here on the pages of the Arkansas Economist when final information becomes available.

# # #

Arkansas Taxable Sales (ATS) is calculated by the Institute for Economic Advancement to serve as a timely proxy for Arkansas retail sales. The series is derived from sales and use tax data, adjusting for the relative timing of tax collections and underlying sales, changes in tax laws, and seasonal patterns in the data.  Arkansas Taxable Sales Including Gasoline (ATSIG) incorporates data on the state motor fuel tax and gasoline prices from the Oil Price Information Service.

A spreadsheet of the data is available here: Arkansas Taxable Sales 2012:Q4 (Excel file)

* Data are preliminary until the release of the DFA report, Arkansas Fiscal Notes for January 2013, and will be updated when information becomes available.

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