BIZTIPS - February 26, 2006

Biz Tips: Global Economic Outlook Hits Home
Sunday, February 26, 2006
By Art Hill

Speakers at last week's Economic Outlook Breakfast in Pendleton focused their comments on local and regional issues -- industrial park development, job growth, urban renewal. Jim Azumano, the Governor's Rural Policy Advisor broadened the discussion to issues of concern for all of rural Oregon.

But in today's global market, we also need to keep our eyes on national and international trends for a clearer picture of what can happen to our local economy.

Aside from acknowledging the negative effects of high oil prices and politically unstable countries, most economists focus on factors they can measure -- low mortgage rates, rising healthcare costs, high import levels, the cost of the wars in Iraq and Afghanistan.

Can we possibly connect all the dots for a complete forecast? Some economists try, but their reports are loaded with cautions like "if there are no major natural disasters," and "unless civil war breaks out in _____ (fill in a country name)." That's not very reassuring, but nobody promised us a crystal ball.

So what global trends might impact our local economy in 2006? The following three are selected from a recent Wall Street Journal "Top 10 Trends" article.

The China market continues to expand. From automobiles to high tech, this country of 1.3 billion is looking for ways to spend its growing wealth. The company behind China's version of Google saw its stock value more than quadruple on opening day. China now consumes about 30% of the world's steel. UPS is investing a half billion dollars in expanding its China shipping capacity. Got something the Chinese need? Oregon farmers do ... they shipped about 15 million tons of grass seed to China last year.

The Web is back. The "dot-com bust" is history. On-line advertising has finally taken off. New websites are using ad dollars to pay for free services including blogs and social networks. Internet-based long distance company Vonage has raised over $400 million in venture capital. It's time to look into voice-over-Internet (VOIP) long distance for your company. Hint -- an eastern Oregon VOIP supplier sponsored this year's Pendleton Chamber awards banquet.

And finally, while family income is only about equivalent to 1990 levels, house prices have soared. Yet thanks to low mortgage rates, houses are still roughly as affordable as they were 15 years ago. Borrowing against home values is huge, but are we building a house of cards? You bet. Problem is, values don't rise forever, and when ageing baby boomers start unloading their big houses, values could drop, stranding many over-borrowed owners.

So while we may not be able to predict the outcome of all possible economic trends, we can pick a few that relate to our own businesses (and lives). Trends in Beijing do impact eastern Oregon. Let's keep our eyes on them.

Content © 2006 East Oregonian