RECESSION REVERSAL?

Oklahoma posts first GDP gain in four quarters

Improving agriculture and energy prices helped Oklahoma reverse three consecutive quarters of decline in another sign that the state economy may be crawling out of a twoyear slowdown.

Oklahoma’s gross domestic product in the third quarter of 2016 posted its first gain in four quarters, but still ranked No. 47 among U.S. states, according to a report released Thursday by the U.S. Bureau of Economic Analysis.

The state’s GDP gained 0.7 percent from the previous quarter, following declines of 2.7 percent, 1.9 percent and 7.5 percent in the three previous quarters.

“Since a lot of what we produce is commodities, when commodity prices fall, Oklahoma’s GDP has no choice but to fall. It’s a matter of math,” said Russell Evans, executive director of the Steven C. Agee Economic Research & Policy

Institute at Oklahoma City University.

Overall GDP improved in 48 states and in Washington, D.C., in the third quarter. South Dakota had the largest gain at 7.1 percent. New Mexico and Alaska each declined by 0.1 percent.

Two consecutive quarters of GDP decline technically defines a recession, meaning the state emerged from a recession in the third quarter, following three quarters of declines. Evans, however, said it’s important to consider both GDP and employment together. Both have been down over the past two years, although not necessarily at the same time.

“What’s happened to us in the state, we had a collapse in a key sector followed by something that looked very similar to a mild U.S. recession,” Evans said. “We were already exposed by the weakness in the oil and gas industry. That made it look like a recession.”

The third-quarter GDP improvement was led by a gain of 0.56 percentage points by the state’s agriculture sector, a gain of 0.37 percentage points in wholesale trade, an improvement of 0.33 percentage points in the finance sector, according to Thursday’s report.

Mining — including oil and natural gas recovery — shrunk by 0.16 percentage points in the third quarter, improved from a reduction of 2.6 percentage points in the second quarter.

Nationwide, mining declined 3.5 percent in the third quarter while wholesale trade grew by 8.6 percent.

Oklahoma’s economy has been showing signs of recovery over the past several months. The state’s oil and natural gas sector has benefited from higher commodity prices, which have led to increased drilling activity.

“We saw oil prices form a bottom in the summer of 2016 and carry that through the year, so I would expect by the time we get to the fourth quarter, we will see mining adding to the GDP,” Evans said. “As we get into the first quarter of 2017, we’ll see significant adding.”

Evans said the recovery likely will continue throughout the year.

“We’re at an inflection point — from contraction and weakness to recovery and health,” he said. “It looks like we will make that transition some time this spring or summer. So by the end of 2017 — barring any significant effect from unpredictable executive orders — we should be feeling much better at the end of this year than last year.