Idaho’s Hot Streak Shows Signs Of Cooling Experts See Mixed Prospects For State During Coming Year

Expect a leveling off of Idaho’s economy, a risky national business environment and a wild ride on the stock market, executives from First Security Bank predicted in their ‘98 Economic Outlook on Thursday in Coeur d’Alene.

And blame a lot of it on Asia, they said.

About 300 people were on hand for the bank’s 30th annual forecast of the coming year’s economy.

Kelly Matthews, executive vice president and chief economist for First Security Corp., told the audience to prepare for lower inmigration and a resulting downturn in building permits and home construction in Idaho.

“The two words I would use to characterize economic performance would be ‘moderate’ and ‘sustainable”’ Matthews said.

He forecasts net migration of 11,000 people to Idaho in 1998, down 9 percent from last year. The number of single-family building permits should fall 2 percent to 7,065, and total construction value is expected to drop 4 percent to $1.65 billion.

“Part of the answer for lower net migration is that those people have good jobs where they are now,” Matthews said. “The pressure to move to Idaho isn’t as strong as it used to be.”

Growth in personal income will slow to 5.3 percent in 1998, the economist said, easing back to a rate that matches the national average. Average per capita income in Idaho is projected to be $26,140 this year, Matthews added.

While the state is still enjoying growth that started in 1988, forces on the sideline could threaten that progress, according to Matthews, who said bankruptcies increased 28 percent in 1997.

“That’s difficult to understand, given the strength of the job market,” he said. “And it’s a little scary to think about what it might be like if things got a little bit tough.”

Warning that Idaho is not “an isolated island, immune from the effects sweeping through the Asian market,” Matthews noted that computer chip prices and lumber futures have already been dragged down by economic fallout in the Pacific Rim.

That result, said First Security Chairman and Chief Executive Officer Spencer Eccles, has national economic implications.

The “Asian meltdown” was due to growth that was led by government involvement rather than market forces, Eccles said.

“Eventually, the chickens had to come home to roost,” he added. “And they’re home in spades right now.”

Eccles predicted virtually all of the Asian market will be in or near recession throughout 1998, prompting sharp curtailment of U.S. exports to those countries and a rise in imports.

“Expanded Asian exports - primarily to the U.S. - will be a fundamental component in repairing their economic damage,” he said.

On the domestic front, Eccles forecasted moderating growth in gross domestic product of 2 to 2.75 percent, a fairly stable unemployment rate of between 4.8 and 5.2 percent, and equally stable housing starts of up to 1.44 million units.

Eccles gave his 1997 forecast a “C” grade, saying he was off the mark on gross domestic product, inflation, unemployment and housing starts. Then again, he reminded, he was wrong in the right direction - two of the economic indicators outperformed his predictions while unemployment and inflation fell below the rates he projected.

“We missed them,” Eccles admitted, “and we all suffered through a wonderful year.”

Sterling Jensen, president and chief executive officer of First Security Investment Management, said investors who couldn’t stomach the volatile market of 1997 won’t get much relief this year.

“The only certain prediction for ‘98 is that volatility will continue and investors will experience many sleepless nights,” he said.

Successful investing will depend more on avoiding the losers than picking the winners, he advised.

Like his counterparts on the podium, Jensen pointed to the Asian markets as a dangerous financial question mark.

“The Titanic was done in, of course, because it was unable to gauge the extent of an iceberg below the surface,” he said. “Stock investors are still trying to determine the extent of what lies beneath the surface of the Asian currency devaluations and economic slowdown.”

, DataTimes