MONTANA BUSINESS QUARTERLY

Volume 45, Number 1, Spring  2007

Rising Asia and Montana

Becoming Closer Neighbors

by

Philip West

In the context of world history the idea of a powerful and rising Asia is not new. A thousand years ago the emerging countries of today, including much of Asia, were more powerful economically than the countries that we define today as developed. Among the four largest economies in the world by 2040 three are projected to be in Asia (China, Japan, and India) with the possibility, barring major catastrophes, that the economy of China will by then be larger than that of the United States.

Will Montanans Even Notice?

by

Paul E. Polzin

There is a little chill in the air for the U.S. economy. GDP growth should average just 2 percent from mid-2006 to mid-2007 compared to 3 percent to 4 percent from 2004 to 2006. The two causes of the slowdown are: (1) a plummeting housing market and (2) a more cautious consumer. The Federal Reserve may start cutting interest rates, bringing to an end the tight monetary policy and rising interest rates.

by

Paul E. Polzin

Montana's economic boom is spreading, with all major sectors of the economic base now participating. Growth has taken place in manufacturing, nonresident travel, agriculture, mining, and the federal government. Buoyant conditions in construction and real estate may add a short-term boost in certain parts of the state, while Montana continues to buck national trends in construction, real estate, and house prices.

by

Norma P. Nickerson and Melissa Dubois

Quit griping about gas prices. The current price of gasoline is actually less now than in 1980, when adjusted for inflation. Gas prices have not had a substantial effect on travel because Americans have not hit their threshold on the price they are willing to pay for gasoline. Montana's travel industry has been on a growth projection for years, and growth occurred in virtually all travel indicators within the state from 2005 to 2006.

by

Daphne Herling

Health care spending the in the United Sates continues to have a major impact on the national economy. Even with the increase in spending, 18 percent of Americans under age 65 do not have any health insurance. The lack of federal level reform has lead many states to enact changes to control the level of spending. Montana has made several incremental changes to address the rate of uninsured in the state. However, despite Montana's strong economic growth, the prospect of improvement in the state's uninsured rate is not strong.

by

George Haynes

Montana's agricultural sector produced over $3.2 billion of sales in 2005, while generating net farm income of over $700 million, or 4.4 percent of Gross State Products. Montana's net farm income declined by nearly 15 percent from 2004, but was substantially above the five-year average for net farm income. The 2007 Montana agricultural outlook for both crops and livestock is promising, with relatively strong prices.

by

Charles E. Keegan III, Thale Dillon, and Laurie Toomey

Montana's manufacturing industry had increased sales, employment, and worker earnings in 2006, building on improvement both in 2004 and 2005. The sector in 2006 produced approximately $8 billion in product output and employed close to 27,500 people who earned $1.2 billion in labor income. The manufacturing sector accounted for over 20 percent of Montana's economic base. Some Montana manufacturers were also positively impacted by the continued growth of Montana's economy and those of adjacent states.

Current Conditions and 2007 Forecast

by

Charles E. Keegan III, Thale Dillon, Jason P. Brandt, and Todd A. Morgan

Average lumber prices fell by over 20 percent in 2006 relative to 2005. Lower prices coupled with continued constraints on timber harvest caused a decline in sales, production, and employment in Montana's forest products industry. No dramatic improvements are expected in 2007.