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Cautious optimism outlook maintained for ND revenues

Neal Fisher, of the North Dakota Wheat Commission, discusses the state of crops this season during a meeting on Monday morning in the state Capitol of the Advisory Council on Revenue Forecasting. Other members of the council, from left are Rep. Jeff Delzer, R-Underwood, chairman of the House Appropriations Committee, Ryan Rauschenberger, state tax commissioner, and Kathy Strombeck, state tax department. Tom Stromme / Bismarck Tribune

BISMARCK—Cautious optimism remains a theme of forecasting for North Dakota's economy and revenues as state officials and industry leaders met Monday, July 16, to discuss preliminary outlooks for the next few years.

Dan White, an economist with Moody's Analytics, presented a "slow and steady" look out to 2021 to the Advisory Council on Revenue Forecasting, the informal group that met Monday morning at the state Capitol.

White said a national recession may hit the United States around mid-2020 or 2021 after about a decade of record economic expansion — though North Dakota would likely benefit, especially in terms of labor.

"Compared to the U.S. over the next year and a half to two years, North Dakota will definitely be an underperformer, but, after that next turn in the business cycle, from a national perspective, we do see a lot of upside for North Dakota to be able to add more workers and add more activity into that," White told the group by phone.

However, uncertainty and risk remain related to trade and tariffs, interest rates and the ever volatile nature of commodity prices which directly affect the state's economy. Despite concern over tariffs and trade wars, White said few of the tariffs have yet taken effect, despite "bluster" and "threats." But tariffs could "get a little scary" with Canada and China, he added.

Members of the advisory council said they'll see how the situation plays out. Neal Fisher, administrator of the North Dakota Wheat Commission, said the tariffs have made for some "jittery markets" and animosity or anxiety amid the escalating tactics. He also said the U.S. returning to the Trans-Pacific Partnership could improve access and opportunities for markets.

"If we can get back into that agreement ... it would allow us to stay at least as equal competitors with the Canadians and Australians; otherwise, they'll bypass us in markets," Fisher said.

He also said soybeans, corn and wheat around the state are looking good in a potential rebound year from the 2017 drought with help from timely planting and a "patchwork" of rains. But still, caution.

"Until it's in the bin, we don't start counting our chickens too quickly here," Fisher said.

Oil prices and production also made for much discussion, coming just days after the state Oil & Gas Division released preliminary numbers from May showing new records for daily oil and natural gas production in North Dakota, as well as producing wells.

"And do you know what? That can change quickly," Senate Majority Leader Rich Wardner, R-Dickinson, said.

He also said he liked the conservative approach to forecasting. Compared to the legislative forecast from May 2017, general fund state revenues are 3.3 percent over forecast from biennium-to-date, which Joe Morrissette, director of the Office of Management and Budget, said is about as good as could be expected.

Morrissette, who chairs the Advisory Council on Revenue Forecasting, said Monday's discussions will feed into the preliminary forecast to be released in August as the first look at the 2019-21 biennium and the tail end of fiscal year 2019. The new forecast may adjust sales tax estimates for 2019 and keep a conservative estimate on oil markets.

"What we come up with here as a forecast will become the basis for a lot of the work that we do on the executive budget," he said.

Members of the advisory council agreed much remains to be seen, from crop potential to interest rates.

Rep. Jeff Delzer, R-Underwood, who chairs the House Appropriations Committee, said "interesting" oil production and the outcome of tariffs will be some things to watch.

"I think as far as North Dakota, it's probably cautious optimism," he said. Fisher said there's more to be thankful for this year than in 2017 amid the drought.

"We have good potential for things to turn around pretty good if we can get this crop in the bin and oil prices stay where they are," he said.

Moody's Analytics isn't the only firm to offer a look ahead. The interim Legislative Revenue Advisory Committee contracted with IHS Global to yield a separate forecast due in September.