UM expert: Montana’s immediate economic future bright – Tour continues throughout Montana

Montana’s economy looks good for the next couple of years, an annual gathering of researchers and business experts concluded in Missoula on Friday.

"The slow growth of the last few years is over," said Paul Polzin, director of the Bureau of Business and Economic Research at the University of Montana. "We expect it to change to solid gross domestic product growth in ’04 and ’05."

By ROB CHANEY of the Missoulian

http://missoulian.com/articles/2004/01/31/news/local/news04.txt

Polzin and others spoke to more than 200 local business leaders, government officials and others at the Holiday Inn Parkside during the annual Montana Economic Outlook Seminar. Polzin based his claim on reports that businesses are buying more investment goods such as computers and equipment. Inflation is projected to be flat, at least through 2004. And interest rates could start heading up in June, well before the election, but shouldn’t take too much off the economic steam.

The state’s economy also felt little effect of the national economic downtrends of the past two years, Polzin said. In part, that’s because the national trends tracked the poor performance of manufacturing and consumer-goods industries that don’t have much presence in Montana.

Instead, improving world markets should benefit the Treasure State. With the return of major mining to Butte and continued labor productivity growth statewide, Polzin predicted the state’s economic growth to average 2 percent a year through 2007.

As always in economic forecasts, there were clouds on the horizon. In Montana’s case, the notable ones included the threat of further mad cow disease on the cattle industry, interest rate increases that could hurt demand for construction materials and a reversal of the dollar’s slide against foreign currencies, which could make U.S. exports more expensive.

Health insurance is another troublesome factor, according to UM community research director Daphne Herling. While Montanans spend about 16 percent of their gross state wages on health coverage, those costs are predicted to rise at least 10 percent a year while wages appear to remain flat. Meanwhile, the state has about 41,500 children living in families without any health insurance, a number equal to all of Missoula’s residents east of Reserve Street.

Of those under age 65, about 22 percent of Montanans have no health coverage. Those people are also likely to carry a lot of medical debt – unpaid hospital bills that eat up their wages.

"These people without health insurance aren’t just the poor," Herling said. "They’re your neighbors, people with jobs. This is quite an impact on the state’s economy."

On the tourism front, Institute for Tourism and Recreation Research director Norma Nickerson said Sept. 11-related changes were still rippling through the industry. In particular, hotel rates nationwide have fallen about 4 percent since late 2001, while sales of recreational vehicles rose 30 percent.

"The trend appears to be less people doing more," Nickerson said. One interesting change is the growing wanderlust of Canadians, where Alberta is the fastest-growing province and Calgary is the fastest growing city. Unfortunately, most of those Canadians are flying south, and Montana has few air connections to bring them down here.

Audience members wondered how much more to expect from the Lewis and Clark commemorations. Nickerson said she expected the major Montana events to attract mainly in-state people in 2004 and 2005. But she hoped that national media attention of those gatherings would draw new out-of-staters in subsequent years.

"If marketing efforts change, we could draw more outsiders sooner," Nickerson said. "But I don’t see the dollars there to do promotion."

The state’s manufacturing sector had a "third difficult year in a row," according to UM research professor Charles Keegan. Utility and health care costs continue to hurt the industry, while a strong global economy is making it easier for Montanans to market their products.

This is a tricky situation for the state’s wood products industry, Keegan said. On one side, limited access to timber is forcing many mills to curtail or close. But those who can get wood are enjoying high prices and demand for their products.

"The economy is like the weather: There’s very little we can do to affect it," said Steve Holland of the Montana Manufacturing Extension Center. "Economic forecasts are similar. We don’t quite believe them, but we do read them."

Reporter Rob Chaney can be reached at 523-5382 or at [email protected].

**************

ECONOMIC OUTLOOK SEMINAR SERIES TOURS MONTANA

http://www.umt.edu/urelations/releases/2004/012204BBER.htm

Understanding economics will help people make realistic and profitable business decisions, ultimately putting more money in their pockets, according to a researcher at Montana State University-Bozeman.

During the past decade, legislators and educators have recognized that U.S. citizens need to be economically literate to compete in the marketplace and become successful business leaders. In response, many states — including Montana — have begun to require economic education in the classroom, said Vince Smith, MSU professor of agricultural economics and economics.

“Individuals with a solid grasp of economic principles better understand the major forces that affect the quality of their lives,” Smith said. “Economic literacy helps people forecast future market conditions, anticipate future cost changes, assess business consequences such as the Iraq war and make their business more efficient in today’s cutthroat environment.”

Smith will discuss Montana’s efforts to establish economic standards throughout the school system at the 29th Economic Outlook Seminar series to be held in nine Montana cities starting the last week of January.

This year’s theme is “Street Smart Economics: Know When to Hold ’Em and When to Fold ’Em.” The series is sponsored by the Bureau of Business and Economic Research at The University of Montana-Missoula and First Interstate Bank.

As in years past, the seminars will highlight the latest economic trends and what they mean for Montana. In looking at the national economy, Paul Polzin, BBER director, notes most economists expect strong GDP growth, mild inflation and rising interest rates.

In Montana, overall economic performance was above the national average during the 2001-03 period, but this situation will probably change as the U.S. economy recovers, Polzin said. Montana’s 2003 home prices also grew faster than the national average, providing one more indicator of Montana’s relatively strong economy, he said.

Also at the seminars, experts will examine recent trends and outlooks for important Montana industries, including wood products, manufacturing, agriculture, health care, and travel and tourism.

The seminar series will begin in Helena on Tuesday, Jan. 27, at the Colonial Inn. Following is the schedule for the other cities:

* Great Falls, Jan. 28, Holiday Inn.

* Missoula, Jan. 30, Holiday Inn Parkside.

* Billings, Feb. 3, Northern Hotel.

* Bozeman, Feb. 4, Holiday Inn.

* Butte, Feb. 5, Ramada Inn Copper King.

* Kalispell, Feb. 10, WestCoast Kalispell Center Hotel.

* Lewistown, March 10, Yogo Inn.

* Havre, March 12, 15 West.

All seminars run from 8 a.m. to 1:30 p.m. A $70 fee includes registration, a proceedings book, lunch and a complimentary one-year subscription to the Montana Business Quarterly. Continuing education credits are available for an additional $20 processing fee. To register, call (406) 243-5113 or visit the Bureau’s Web site at http://www.bber.umt.edu.

###