Mining Industry Boosts Third Quarter Economic Growth In Several States

Many economists are predicting a recession in 2023 due to the Fed’s rate hikes to slow inflation, less fiscal stimulus, and weaker consumer spending abroad that will decrease U.S. exports. But for now, economic growth remains positive. Third-quarter U.S. real GDP growth was revised up to 3.2% in the latest estimate from the Bureau of Economic Analysis (BEA), driven by growth in 47 of the 50 states and Washington D.C. according to the BEA’s latest release.

As shown in the map below, the annual real GDP growth rate in the third quarter was over 5% in Alaska, Texas, Oklahoma, Wyoming, and North Dakota. The mining industry was the leading contributor to the strong growth in these states.

It is good to see the mining industry do well, since we will need a lot more mining if we want to increase our use of battery power. As Mark Mills has explained, dramatically expanding the use of battery power requires 700% to 4,000% increases in the mining of rare earths, nickel, cobalt, and other minerals. Fossil fuels will always be needed to deal with surge and intermittency issues, but any notable shift towards battery power will still require hundreds of new mines and a major expansion of the mining industry.

Meanwhile, growth was negative in Mississippi (-0.7%), South Dakota (-0.5%), and Indiana (-0.3%). The construction industry was the biggest drag on Mississippi’s and Indiana’s economies.

The Fed has been aggressively raising interest rates in order to slow inflation and this has driven up mortgage rates and other construction loan rates, reducing demand for new buildings. Housing starts for single-family homes have declined sharply over the last few months, as have housing prices. The construction industry is likely to remain weak as firms and consumers adjust to the new interest rate environment.

The information services sector—which includes publishing, telecommunications, broadcasting, data processing, and other information services—grew in all 50 states and Washington, D.C. and was the leading contributor in 14 states including California, Massachusetts, and New York.

A recession may be likely in 2023, but the most recent GDP data show that nearly all states are growing. The fourth quarter numbers may tell a different story, but for now economic growth is generally positive despite the significant headwinds on the horizon.