Economist predicts somewhat better times in Montana

HELENA - Montana's economy will improve a little this year before settling into a more traditional growth rate through 2007, a leading economist predicted today.

In the annual economic preview by the Montana Bureau of Business and Economic Research, director Paul Polzin said the state can expect a slight surge in nonfarm income, from a 2.3 percent increase last year to 3 percent in 2004. Then, growth will recede to about 2 percent annually for the next three years, he said.

The estimates are about half a percent higher than those made by the bureau a year ago, he noted.

But, he also warned that the forecast is not without risks.

Even that growth may not be realized if the national and world economic recovery falters, the effects of the mad cow disease scare become more serious, or a sharp rise in interest rates affect the construction and timber industries, Polzin said.

On the other hand, he added, strong prices in the commodity markets are reason for optimism and ''we don't see significant crisis among our natural resource industries.''

During his presentation to business and government leaders here, Polzin said some of the relatively cheerful economic reports they have seen comparing Montana to the rest of the nation may be disappearing.

''During the past few years, Montana has ranked high in terms of state economic performance,'' he said, referring to reports of high income growth rates.

''That was not because our economy improved, but because the rest of the country was doing so poorly,'' Polzin added. ''Now, the rest of the states are going to be recovering, and Montana's ranking is likely to drift downward.''

In contrast to Montana's projected growth of 2 percent to 3 percent through 2007, he said the national economy is expected to grow by 3 percent to nearly 5 percent over the same four-year period.

Polzin contends the state avoided most of the fallout from the national recession because it has few of the industries hardest hit by the downturn that began in April 2001.

Internet-based companies, high-tech manufacturing, communications and financial services were slammed by the recession, he said. But Montana's economy is grounded in agriculture, mining, wood products and other manufacturing, transportation, tourism and federal government spending, he said.

Nationally, the consensus among economists is that the ''jobless recovery'' is over and rising employment will fuel the U.S. rebound, Polzin said.

But one thing that economists do not agree on is the effects of a growing national budget deficit that has been reported to be around $500 billion, he said. Although that has been described as a record amount of red ink, Polzin said it's in line with the deficits of the 1980s and 1990s when seen as a percentage of the country's gross domestic product.

He also noted that federal deficits are not uncommon. The United States has surpluses in only 12 of the past 70 years, and in just three of the past 24 years, he said.