Minnesota’s economy shrank slightly in early 2024 amid agricultural sector declines that slammed much of the Midwest.
Agriculture losses hit Minnesota’s GDP
Growth and consumer spending slowed nationwide in the first quarter and dropped throughout the Midwest, including Minnesota.
The Minnesota Star Tribune
June 28, 2024 at 6:48PM
While real Gross Domestic Product (GDP) increased in 39 states and the District of Columbia between the fourth quarter of 2023 and the first quarter of 2024, Midwestern states experienced just small gains or drops, according to U.S. Bureau of Economic Analysis (BEA) data released Friday.
The country’s biggest GDP decline was 4.2% in South Dakota; Minnesota saw a 0.8% loss. The BEA also reported declines in North Dakota, Nebraska, Kansas, Iowa and Illinois.
“It wasn’t a great GDP report for the country overall, but for the Midwest, it was a really bad outcome,” said Scott Anderson, chief U.S. economist and managing director at BMO Capital Markets.
The U.S. economy as a whole grew 1.4% in the first quarter thanks to retail trade; construction; finance and insurance; and health care and social assistance, according to the BEA. While agriculture, forestry, fishing and hunting increased in 34 states — and led growth in six — it offset growth in nine states, all in the Midwest.
Prices for key regional crops — including corn, soybeans and wheat — were down in the first quarter, according to the U.S. Department of Agriculture. Crop losses due to heavy rains and flooding this spring and summer could worsen the situation in coming quarters.
“These weather disasters certainly don’t help,” Anderson said. “Sometimes they can if it cuts supply enough that prices stabilize, but I’m not seeing any evidence of that. ... The more we have to cope with climate change and these once-in-500-year floods, this is something we’re all going to have to learn how to navigate.”
National first quarter growth, the slowest since spring 2022, accompanied a deceleration in consumer spending even as personal income rose in all 50 states.
Americans have pulled back on spending as elevated interest rates continue to take a toll. That’s what rate hikes intend to do: The Federal Reserve has raised its benchmark rate to a 23-year high of 5.25% to 5.5% in an effort to pump the brakes on the economy and bring inflation down to its 2% target.
Consumer Price Index data released June 12 showed U.S. inflation rose 3.3% year-over-year in May, prompting speculation that the Fed might lower rates this year.
This year “is shaping up to be a very different business environment and economic environment than what we saw last year,” Anderson said. “I do think we’re going to see more pressure on consumption continuing. Some of that is being made up for now with strong government spending and continued resilience in business investment, but we’re not sure that can last into the second half of the year.”
The Associated Press contributed to this report.
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