In a recent report, University of Montana economist, Paul Polzin, underscored the importance of worldwide economic conditions to Montana. As the recent downturn — due in large part to a drop in world commodity prices — in the state’s economy demonstrates, what happens in other countries matters in terms of jobs, livelihoods, companies and tax revenues in Montana.
“… a large part of the Montana economy is dependent on commodities,” said Polzin, “…some of our largest manufacturing firms rely on the world market, in particular Applied Materials in Kalispell and REC Silicon in Butte… our wheat farmers sell much of their crop on the world market.”
In reviewing state and national trends in an article in the Montana Business Quarterly, Polzin noted that, “Led by the U.S., most regions of the world are now growing,” but in Montana the overall growth rate in 2016 was less than the 2015.
“In Montana, low oil prices continued to dampen the economy in the eastern part of the state and a drop in agricultural prices has impacted farms and ranches statewide.… The energy and agricultural sectors are not projected to improve markedly in the near future and economic growth may be only slightly above that of 2016.”
“The overall world outlook is more positive than last year. Global economic growth will be about 2.6% in 2017 and Moody’s analytics projects it will accelerate to 2.9% in 2018.
In Europe, Germany remains the growth leader with France lagging behind a bit, said Polzin. Countries such as Italy and Spain are growing the unemployment rates are still near 20% in places such as Greece and Spain. “The UK remains a big unknown. A new recession and rising unemployment that some predicted what immediately Brexit has not occurred.”
“Hanging over the entire region is the potential for an energy crisis. The unresolved situation between Russia and Ukraine could result in a short drop in energy supplies to Western Europe and a corresponding rise in prices.”
The South American economy should show like slight growth and Moody’s Analytics projects an acceleration in 2018.
The Mexican economy decelerated because new reforms did not stimulate investment as much as expected, according to Polzin.
Theoretically, a long awaited nationwide tax reform in India will improve the efficiency of the Indian economy.
“Reliable economic data for the Chinese economy remains problematic, but the news is not good. Official statistics show only a moderate deceleration to 7 or 8 percent annual growth rate. Private nongovernment sources paint a much darker picture, with these estimates showing annual increases in the 2 to 3 percent range.”
“Japanese consumers are feeling more buoyant as improved employment conditions and a rising stock market boost sentiment.”
In Canada, pessimism resulting from the oil price drop is over and there was solid growth in late 2016 and early 2017. The labor market continues strong and a competitive exchange rate have helped exports.