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Mass. economy slows as US growth picks up

Massachusetts’ economic growth slowed significantly over the summer while the national economy showed a modest pickup, according to two reports released Friday.

The diverging trajectories highlight the difference between the consumer-driven US economy and the Massachusetts economy, which is more dependent on business spending. Nationally, consumer spending increased solidly while overall business investment declined.

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The state’s economic output fell to a 1.9 percent annual rate between July and September, down from 3.0 percent in the preceding three months and 5.3 percent at the end of last year, the University of Massachusetts reported. The US economy grew at a 2 percent annual rate during the same period, an improvement over the spring’s 1.3 percent rate of growth, the US Commerce Department reported.

Robert Nakosteen, an economist at the University of Massachusetts and executive editor of the state report, produced by the UMass Donahue Institute and Federal Reserve Bank of Boston, described Massachusetts’ pace of growth as “not very heartwarming.”

“Business spending on high-tech goods and services after the recession lined this state up to come out of the recession more quickly, but that would only continue if the nation and the global recoveries gained,” Nakosteen said. “It’s been slow and painful, and globally, if anything, it’s taken a turn for the worse.”

As a result, the state’s economy has slowed sharply in recent months.

The Massachusetts unemployment rate increased by half a percentage point over the past three months, to 6.5 percent in September from 6 percent in June.

Several businesses have scaled back or closed in recent months, including the Goddard House Skilled Nursing and Rehabilitation Center in Boston, which laid off 213 employees, according to state records. Earlier this week, game maker Zynga Inc. shuttered its Cambridge office, where about 50 people worked.

The slowdown has occurred primarily in the technology and information sector, a key part of the state’s economy. That sector remained strong after the recession because many businesses nationally and internationally continued to buy goods, such as semiconductors and semiconductor equipment, made in Massachusetts.

But a global slowdown is affecting sales in Europe and China, and Massachusetts is feeling the pinch. State merchandise exports in the first eight months of the year were down 5.9 percent compared with the same period last year.

Teradyne Inc. in North Reading, the maker of semiconductor testing equipment, reported this week that it had orders worth $231 million in the third quarter of the year, down 61 percent from the previous quarter and 4 percent from the same period a year ago.

After surging in recent years, investment in information technology is “essentially flat,” said Alan Clayton-Matthews, a Northeastern University economist.

Clayton-Matthews, who compiled the data for the ­UMass report, said he expects economic growth in the state to pick up modestly over the next two quarters to an annual rate of 2.3 percent, which is not enough to generate significant job gains. He said he expected “virtually no net employment growth in Massachusetts over the next six months.”

Once the national and world economies improve, he said, demand for technology products should increase and boost economic growth here. “I see this as a slowdown in the medium term,” he said.

The data released Friday are subject to revisions. The Commerce Department, for example, recently revised US economic growth for the second quarter to a 1.3 percent annual rate from an earlier estimate of 1.7 percent.

Megan Woolhouse
can be reached at
mwoolhouse@globe.com.
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