Bay State’s economy doubles US pace

Global appetite for high-tech products, services seen as key

Massachusetts’ economy grew at more than double the pace of the US economy in the first three months of this year, largely due to the renewed strength of the state’s high-tech sector, according to two reports issued Friday.

Massachusetts saw gains in consumer confidence, spending, and business sales, particularly in the global semiconductor market, a bellwether for the state economy, while growth in the US economy eased largely due to declines in federal government and military spending.

According to a report in the University of Massachusetts quarterly journal MassBenchmarks, the state economy grew at a 4.5 percent annual rate from January to March, while US economic growth slowed to an annual rate of 2.2 percent during the same period, the Commerce Department reported.


The state’s economy appeared to pick up steam from the last three months of 2011 when growth was 2.9 percent. Meanwhile, US economic growth fell from 3 percent that quarter.

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Though growth rates are subject to revision as more accurate data become available. Martin Romitti, managing editor of MassBenchmarks, said the state’s “robust recovery’’ from the recession is largely due to the fact that there is global demand for high-tech products and services offered by Bay State companies. The state’s heavy concentration of health care and educational institutions has also helped the state weather the recession better than most.

Production of information-processing equipment also expanded at a double-digit annualized rate, according to the report, which called it “a very good sign for the Bay State’s technology sectors.’’

However, “being double the US rate, we’ve got to be a little cautious about throwing up our hands and shouting, ‘hip hip hooray!’ ’’ Romitti said. “It’s really strong growth, but it’s hard to imagine that we could sustain that.’’

Forecasters cautioned that uncertain economic conditions in Europe and slowing growth in China could affect Massachusetts growth.


Romitti said Massachusetts companies that produce semiconductors and semiconductor equipment have seen sales increases since January, but that follows a slowdown in 2011 due to unexpected events including an earthquake in Japan and flooding in Thailand.

Nationally, business output slowed and the rate of business equipment and software investment so far this year dropped sharply.

Lower federal government spending was another drag on the national economy, with government spending on goods and employee wages decreasing 5.6 percent in the first three months of 2012 after sliding 6.9 percent in the fourth quarter of 2011. Similarly, defense spending shrank 8.1 percent at the start of this year, on the heels of a 12.1 percent decrease in the last three months of 2011.

“Prospects for the employment markets remain cloudy,’’ Amherst College economics professor Brian Bethune wrote in his forecast. “That is troubling, since there has been a 2 percentage point drop in the labor force participation rate since the fourth quarter of 2008.’’

The nation’s unemployment rate in March was 8.2 percent, compared with Massachusetts’ 6.5 percent for the same month.


Consumer spending on goods subject to Massachusetts’ sales tax grew 3 percent and home sales continued an upward trend that the report said was “consistent with an improving employment picture and rising household incomes.’’

Massachusetts did see a 10.9 percent drop in spending on motor vehicles by state residents in the first quarter, but the report noted that the decline followed “extraordinary growth’’ of 19.1 percent in the last three months of 2011.

“There is evidence of a continued recovery,’’ said Michael Goodman, a public policy professor at the University of Massachusetts Dartmouth and co-editor of MassBenchmarks. “This is not to say we’re out of the woods - we’re digging out of a very large hole from the great recession and we still have fewer jobs than we need to provide relief to the number of families that are unemployed.’’

Megan Woolhouse can be reached at