Things Have Changed Since 1976

12.5 MPG

24.1 MPG

Gas Mileage, U.S. Fleet

1976

2014

13.3 mBTU

6.2 mBTU

Energy per Dollar of GDP

1976

2014

155 ppb

29.4 ppb

SO2 Emissions, U.S.

1980

2014

The Revolution is Very Recent Vehicle-Miles Travelled: Growing Since World War II

Stagnant Since 2007 U.S. Crude Oil Production: Declining since 1970

Up by 92% since 2008

$186 mil.

$3.2 billion

2007 2014

$32,016

$73,057

2004 2013

North Dakota Resource Taxes Williston Wages Per Job

Patrick M. Barkey, Director Bureau of Business and Economic Research

University of Montana

The Global, National and State Economic Outlook

Oil Markets Deliver a Surprise

• Best six month performance of the U.S. economy since well before the recession

• Evidence of stronger, more bullish small business activity

• Global outlook dims • Declining oil prices reverberating around the

world

National and Global Developments

Economic Performance Finally Meeting Expectations Forecasts of U.S. Real GDP Growth, Percent

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2013 2014 2015 2016 2017

20132014

Percent

Source: IHS, Inc.

U.S. Labor Market is Getting Better

-2500

-2000

-1500

-1000

-500

0

500

1000

1500

06 07 08 09 10 11 12 13 14

3000400050006000700080009000

10000110001200013000

04

05

06

07

08

09

10

11

12

13

14

Thousands Thousands

Quarterly Job Growth, U.S. Working Part-Time for Economic Reasons, U.S.

10.5 million jobs

04 06 08 10 12 14

8.5% Russia

1.8%

United States

2.2%

Japan

2.0%

Canada 3.1%

Eurozone

6.1% Brazil

9.8% India

14.2% China

Taking a Tour of Global Growth, 2007

Real GDP Growth, Percent

-7.8% Russia

-2.8%

United States

-5.5%

Japan

-2.7%

Canada -4.5%

Eurozone

-0.3% Brazil

8.5% India

9.2% China

Taking a Tour of Global Growth, 2009

Real GDP Growth, Percent

0.5% Russia

2.2%

United States

0.4%

Japan

2.4%

Canada 0.8%

Eurozone

1.5% Brazil

5.5% India

7.6% China

Taking a Tour of Global Growth, 2014

Real GDP Growth, Percent

U.S. Outlook Summary

• Self-sustaining cycle of income growth and consumer spending

• Stronger dollar • No inflation • Higher interest rates • An island of growth in the global

economy for how long?

Montana’s Growth: More Balanced, but Slower

• Growth patterns starting to look more like ten years ago

• The commodity boom is over, will agriculture prices follow?

• Labor markets are quietly getting tighter • Tourist and visitor spending growth appears

healthy • Bakken price point has been reached

IMF Commodity Price Indices (2005 = 100)

125

150

175

200

225

2010 2011 2012 2013 2014Source: International Monetary Fund

Non-energy

Energy

All

Oilfield Investments Have Been a Big Driver of the U.S. Economy

10

15

20

25

30

35

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Oilfield Investment Share of Nonresidential Structures Investment, U.S.

Percent

Investment Response to Price Shock

-8.00

-7.00

-6.00

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Percent

Mining and Oil

Excluding Mining and Oil

Total

Quarter

Richland 15.4%

Gallatin 6.4%

Madison 10.2%

Yellowstone -1.6%

Real Payroll Wages Growth Percent Change, 13Q2-14Q2

Montana’s Recent Growth Percent Change in Real Wages and Salaries

-2

-1

0

1

2

3

4

2008 2009 2010 2011 2012 2013 2014

Fiscal Year

-100 -50 0 50 100 150 200 250 300 350

TotalAgriculture and Fish

MiningUtilities

ConstructionManufacturing

Wholesale TradeRetail Trade

Transportation & WarehousingInformation

FinanceReal Estate

Professional Business ServicesManagement of Companies

Administrative SupportEducation

Health CareArts & Entertainment

Accommodations & FoodOther Services

Public Administration

Montana Growth in Real Wages, FY2013-FY2014, $ Millions

Where’s the Growth? Total Real Wage Growth, $ million

Difference between Inflation-adjusted Wages and Salaries, FY2014 vs. FY2013

-$20

$0

$20

$40

$60

$80

$100

$120

$ Millions

Decomposing Oil and Gas Growth

0

50

100

150

200

250

300

350

400

450

500

2005 2006 2007 2008 2009 2010 2011 2012 2013

Montana Oil and Gas Earnings by Year

Total

Extraction

Drilling

Support

$ Millions

Energy and Mining:

Significant declines in investment, beginning in mid-2015.

16%

7%

Composition of Earnings in Montana’s Basic Industries, 2012-14

Outlook for Key Industries

Agriculture and Related: Coming off a tremendous financial year.

15%

Composition of Earnings in Montana’s Basic Industries, 2011-13

Outlook for Key Industries

Bee Alert Technology Purity Systems, Inc. Sunburst Sensors Rivertop Renewables Visual Learning Systems Endobiologics AquilaVision TerraEchos Transynaptic Technologies GT NeuroPharma Sinapis Pharma Submittable

Oracle Microbion Siafu Technology Montana Molecular Ticket River Zoot Enterprises Elation Corp. Montana Photonics LMG Security

Tracking Montana’s High Tech Companies

3.2

2.7 2.7

3.6

2.1 2.1

2.8 2.6

2.4 2.5

0

0.5

1

1.5

2

2.5

3

3.5

4

'12 '13 '14 '15 '16 '17

Actual Projected

‘18

Change in Nonfarm Earnings, Montana, 2012-2018

Questions?