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120618-nws-economic-outlook

Dan White, with Moody's Analytics, presents the economic outlook in the next two years for North Dakota to state legislators gathered on Wednesday at the state Capitol in Bismarck. 

An economic recession projected to occur during North Dakota’s next two-year budget cycle is expected to be both good and bad news for the state, an economist said Wednesday.

Dan White, of Moody’s Analytics, presented an economic outlook to legislators as they begin to consider Gov. Doug Burgum’s budget proposal for 2019-21.

The forecast calls for strong expectations in 2019 followed by a slower pace of growth similar to the rate of inflation for 2020 and 2021, said White, director of government consulting and public finance research.

A national recession is expected to occur by the end of 2020, which would cause the demand for oil and agriculture commodities to decrease, he said.

He added that economists believe the recession will be relatively mild.

“We are not predicting the next Great Recession,” White said. “We do not see a huge imbalance anywhere in the credit markets.”

The upside for North Dakota is that a weaker U.S. labor market will make it easier for the state to attract and retain workers.

White called North Dakota’s workforce shortages “one of the major speed limits on growth” for the state. A national recession would lead to an increase in workers seeking opportunities in North Dakota, offsetting the impact of the weakness in commodity prices, White said.

The budget forecast notes that the “trade drama” between U.S. and China complicates the outlook for agriculture, with North Dakota relying on agricultural trade with China especially for soybeans.

The forecast assumes the U.S. has a “reasonably graceful solution” to the trade war before the 2020 election cycle. The report notes that any escalation or extension of the trade war could lead to farmers having a more difficult time than projected in the forecast.

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The biennium runs from July 1, 2019, to June 30, 2021.

Burgum’s budget proposal is based on the assumption that the state will produce between 1.3 million and 1.35 million barrels of oil per day during the biennium, figures the governor’s office said were intentionally conservative.

North Dakota produced nearly 1.36 million barrels of oil per day in September.

Lt. Gov. Brent Sanford, during an editorial board meeting with the Bismarck Tribune, noted that challenges with capturing natural gas could limit the pace of oil production growth during the biennium until infrastructure catches up.

The budget proposal assumes an oil price of $55 West Texas Intermediate the first year of the biennium and $59 in the second year of the biennium, with a $9 discount subtracted for North Dakota crude.

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(Reach Amy Dalrymple at 701-250-8267 or Amy.Dalrymple@bismarcktribune.com)

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