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Recession 2008: What Will be the Montana Impacts?

Recession 2008: What Will be the Montana Impacts?. Paul E. Polzin The Bureau of Business and Economic Research, The University of Montana-Missoula. What Caused the 2008 Recession?. House price bubble bursts Rising interest rates lead to mortgage defaults Credit crunch. Flight to quality

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Recession 2008: What Will be the Montana Impacts?

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  1. Recession 2008: What Will be the Montana Impacts? Paul E. Polzin The Bureau of Business and Economic Research, The University of Montana-Missoula

  2. What Caused the 2008 Recession? • House price bubble bursts • Rising interest rates lead to mortgage defaults • Credit crunch. Flight to quality • $100/barrel oil

  3. Foreclosure Activity- November 2007 Source: www.realitytrac.com

  4. Foreclosure Activity

  5. Index of Single-Family Home Prices, Annual Percent Change OREGON MONTANA WASHINGTON U.S. Source: U.S. Office of Federal Housing Oversight

  6. Montana’s Economic Base • Nonresident Travel • Mining • Manufacturing -Wood and paper • Agriculture • Federal Gov’t (Incl. Military) 90%

  7. U.S. Industries Likely to be Impacted by 2008 Slowdown/Recession • Financial Services • Durable manufacturing • Automobiles • Home building (wood products) • Construction

  8. Actual and Projected Change in Nonfarm Labor Income, Montana, 2005-2011 5.9 4.5 4.4 4.1 4.1 4.0 4.0 Projected Actual

  9. Mining / oil and gas. High commodity / energy prices Manufacturing. High-tech recovery, oil refinery upgrades Nonresident travel- steady two percent growth Federal government. Post Sept. 11 homeland security Agriculture. $8/bushel wheat Causes of Montana’s Boom

  10. Montana Nonfarm Labor Income (Percent Change) Percent No Data Source: U.S. Bureau of Economic Analysis

  11. Commodity Prices Index Lead Copper Zinc Oil Wheat Source: International Monetary Fund.

  12. Commodity Price Forecasts 69 60 70 6.95 6.95 7.65 3.30 3.10 2.95 1.52 1.70 1.35 17.35 20.00 13.50-14.50 Source: Scotiabank Commodity Price Index.

  13. World GDP (Percent Change) Developing Countries Developed Countries Source: World Bank

  14. Percent Manufacturing China Malaysia Indonesia South Korea India U.S. Source: Economist

  15. Summary • Continued statewide growth of 4.0 percent or more • Small 2008 slowdown/recession impact (unless something goes wrong) • Risks • Global geopolitical events • Construction nosedives • Bumper wheat crop

  16. A Final Montana Impact • Montana tax revenues • Dividends, interest and rents • Capital gains • Corporate profits

  17. QUESTIONS?

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