Decreases in Natural Resources and Mining and Financial Activity sectors lead to a 2% drop in Duluth-Superior MSA GDP

Real (inflation adjusted) Gross Domestic Product (GDP) in the Duluth-Superior Metropolitan Statistical Area (MSA) declined  between 2011 and 2012 according to data released yesterday by the U.S. Department of Commerce’ Bureau of Economic Analysis. GDP is a measure of total income earned domestically, and total expenditure on domestically produced goods and services. According to the data, GDP in the MSA (which includes all of St. Louis and Carlton counties in Minnesota, and Douglas County in Wisconsin) declined 2% dropping by $167 million from $8,539,000,000 in 2011 to $8,372,000,000 in 2012. The decline comes on the tail of three years of growth that saw area GDP grow by 4% between 2009 and 2011.

The overall decrease in GDP was the result of sizable drops in two industry sectors – Natural Resources and Mining and Financial Activities – and a small drop in education and health services. Natural Resources and Mining declined by 16% from $319 million to $268 million and Financial Activities dropped by 18% from $1.1 billion to $934 million. Solid gains were posted every other sector led by Professional, Scientific, and Technical Services (+3%), Construction (+7%), Wholesale Trade (+7%), Arts, Entertainment, and Recreation (+8%), Information (+7%), and Manufacturing (+2%).

While the decline in GDP is concerning — 305 of the nation’s 381 metropolitan areas saw economic growth between 2011 and 2012, including the other Minnesota MSAs — it is largely out of our control. In a mining sector that has added almost 1,500 jobs across the Iron Range since 2009, more than tripling its GDP between 2009 in 2011 in the process, the sudden drop seems to be an anomaly. The reasons behind it are complicated, but it probably comes down to international market and export trends. If international demand for iron ore drops (which it did), it is unfortunately going to adversely impact our GDP numbers here in northern Minnesota.

*Authors note – I have updated the numbers in this post after inadvertently using nominal GDP numbers initially. Real GDP is inflation adjusted (chained to 2005 dollars) and is a better way to judge change over time.

Leave a comment