The Phoenix-Mesa-Chandler gross domestic product grew 4.5 percent between 2017 and 2018, making the regional economy the fastest-growing among the top 10 metro areas. Chart shows the growth from 2001 to 2018.
Image: U.S. BEA data. City of Phoenix graphic.
By Eric Jay Toll for PHXNewsroom
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Metro economy up 52% since 2010 depth of the Great Recession
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Manufacturing, information technology and healthcare drive Valley GDP
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Phoenix metro has the fastest-growing economy of the top 10 metro areas
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Construction GDP contribution plunges 45% since 2007
The Phoenix metro area economy grew 4.5 percent in 2018 over 2017, topping Arizona’s 4.1 percent economic growth and the 2.6 percent growth for the U.S. economy. The findings come from a new report from the U.S. Bureau of Economy Analysis released Dec. 12.
The economic value of the Phoenix economy was almost $228 billion, compared to $218 billion in 2017, and $181 billion in 2010. Among the top 10 U.S. metro areas, their economies grew by an average of 2.7 percent, just 0.1 percent faster than the U.S. average. Phoenix-Mesa-Chandler is the 11th-most populous metro area.
“This strong GDP growth is a testament to the importance of local policy in promoting economic success,” said Mayor Kate Gallego. “In the depths of the Great Recession, Valley leaders committed to bringing more advanced industry jobs to Phoenix and our neighboring cities. Since this undertaking started, we’ve seen significant employment growth in these sectors, creating an important shift in the make-up of the valley’s economy.”
Since the bottom of the Great Recession in 2010, the metro economy has grown 25.8 percent. The information technology sector increased its economic output by 92 percent. The health care sector grew 41.8 percent, and manufacturing increased its GDP by 39.6 percent. The economic value of construction is 45.3 percent less in 2018 than it was in 2007, the last peak economic year before the recession.
The economic impact of data centers’ capital investments played into the growth, with the information industry sector growing 15.7 percent in year-over-year comparisons between 2018 and 2017. Transportation and warehousing grew 11.3 percent over 2017, and nondurable goods manufacturing grew 9.6 percent in the year-over-year comparison.
Construction GDP has come back 33.9 percent since the depths of the recession and gained 7.8 percent since last year. Retail GDP is up 3.6 percent year-over-year, but only 1.2 percent compared to what it was in 2007.
The top five industry sectors’ GDP growth over 2017 is information (15.7 percent), transportation and warehousing (11.3 percent), nondurable goods manufacturing (9.6 percent) and construction (7.8 percent).
Advanced industries made up more than 60 percent of the Phoenix metro GDP in 2018, compared to 50.8 percent of the economy in both 2001 and 2007. Retail, real estate and construction saw its GDP share of the metro economy dropped from over 25 percent in 2007 to under 20 percent in 2018. Changing the economy to emphasize advanced industries added close to $35 billion to the Phoenix economy over what it would have been without the change in workforce and industries.
Construction, real estate, retail, warehousing and hospitality comprised 25 percent of the Valley’s economy in 2007, and last year only equaled 19 percent of the economy. Construction contributed $18.7 billion to the Phoenix metro GDP in 2007 and $10.3 billion in 2018, a 45 percent decline since the peak year before the recession.
“What this means is that construction is now serving the Phoenix economy rather than driving it,” said Christine Mackay, director, Phoenix Community and Economic Development. “We see strong year-over-year growth in construction’s GDP contribution to the Phoenix economy because the rest of the economy is growing even stronger than construction. Before the Great Recession, construction’s contribution to the Valley’s GDP is what built Phoenix out of a recession. Now, the economy is growing from increased numbers of high-value jobs and significant increases in capital investment.”
Although Phoenix-Mesa-Chandler is the 11th-most populous metro area, its 4.5 percent economic growth rate was stronger than any of the top 10 metros. With a population of around 18,000 fewer people than the Boston metro, Phoenix is expected to pass Boston and move into the top 10 metro areas in 2020.
The surge in the Valley’s economic growth started in 2017 when Phoenix ranked second among the top 10 metros and continued with its 4.5 percent growth rate in 2018. Phoenix also beat the national growth rate in both 2017 and 2018 after failing to do so in 2013 through 2015.
(Note: Office of Management and Budget changed the name of the Phoenix metro from Phoenix-Mesa-Scottsdale to Phoenix-Mesa-Chandler effective Sept. 2018)
