The Forum Published Tuesday, October 02, 2007

North Dakota’s booming business economy makes it an island of growth in a Midwest and Plains region of relatively stagnant business indicators, according to a new survey.

Creighton University economics professor Ernie Goss said businesses in eight other Midwestern states seem worried about the housing sector and mortgage industry, though the region has been helped by strong farm income and ethanol production.

In September, the Business Conditions Index for the region improved to 56.7 from August’s 56.0. A score greater than 50 indicates growth.

North Dakota’s index rose to the highest level in the region, at 76.1 last month.
“North Dakota’s economy continues to grow at a pace significantly higher than the region and the nation,” Goss said. He expects the state to add nearly 4,000 jobs on a seasonally adjusted basis in the last three months of the year.

The nine survey states are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

The prices-paid index, which tracks the costs of supplies and raw materials, remained elevated in September at 71.6. The figure was slightly lower than August’s 71.7.

The Business Conditions Index also measures supplies, trade, new orders, production, inventories and delivery lead time.

In the region, job growth is likely to remain weak through the last quarter of the year, Goss said.

“The two largest state economies in the region, Minnesota and Missouri, continue to pull overall regional job creation well below the historical average,” Goss said.

N.D. coffers growing

In another sign of good economic times in North Dakota, the state treasury is still taking in money faster than the last Legislature projected, thanks to consumer confidence, good crop prices and a booming oil business, state officials said.

After ending the 2005-07 budget period with $382.7 million – 19.8 percent more in revenues than projected – the first two months of the 2007-09 biennium are setting a similar course.
July and August combined brought in $23.6 million more than the 2007 Legislature expected during that time, putting the state 14.1 percent ahead of projections.

House Majority Leader Rick Berg, R-Fargo, was happy to hear it Monday, especially considering that more than a third of the new surplus is from sales tax.

“It’s really exciting when I looked at the sales tax (collections),” he said. “That’s consumer confidence.”

Motor vehicle excise tax revenue is $1.6 million more than projections and it could be the tip of an iceberg, said state Budget Director Pam Sharp. Farmers enjoying escalating crop prices could be out buying their first new vehicles in years, she said.
Recent per-bushel prices for wheat are $8 to $9 and for durum more than $12.

Farmers buying tractors and combines may also boost sales tax revenues, said Senate Minority Leader David O’Connell, D-Lansford. “Tractors are over a quarter-million dollars (in price),” he said, with combines in the $300,000 range.

Farmers used to harvesting wheat yielding 40 to 45 bushels per acre have seen 65 to 70 bushels per acre, O’Connell said. He credits farm prices and oil activity for booming revenues.

Some North Dakotans are leasing mineral rights for up to $1,000 per acre, he said, and that windfall is likely being spent.

But O’Connell is critical of the Office of Management and Budget and the Republican legislative majority for practicing excessive caution.

“A number of us during the session said, ‘Your forecasts are way too low,’ ” he said Monday. “There were some needs out there (around the state) we should have looked at (spending more on).”
O’Connell and other Democrats say the combined surplus by 2009, counting both general funds and reserves such as the Oil Tax Trust Fund and Budget Stabilization Fund, will likely be $1 billion.

Janell Cole, a Forum Communications Co. reporter in Bismarck, contributed
to this story.