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 U.S. MONTANA OREGON WASHINGTON Source: U.S. Office of Federal Housing Oversight

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

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

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

9. Causes of Montana’s Boom 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

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

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

12. 1990-200520062007f2008f WTI Oil ($/barrel)2666 60 Nymex Natural Gas ($/mmbtu) 3.326.997.508.00 Copper ($/lb)1.013.052.702.25 Zinc ($/lb).501.492.001.40 Nickel ($/lb)3.6411.0013.5018-20.00 Source: Scotiabank Commodity Price Index. 60 7.65 3.10 1.70 20.00 69 6.95 3.30 1.52 17.35 70 6.95 2.95 1.35 13.50-14.50 Commodity Price Forecasts

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

14. China Malaysia Indonesia South Korea India U.S. Percent Manufacturing 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?