Economist: new products will improve business, personal lives

Northwestern Financial Review, Sep 15-Sep 30, 2007 by Sandin, Erik, Miller, Dick

New technology that creak's smaller. faster operating products that consumers like is the engine driving the national economy, an economist told bankers at the recent Independent Community Banks of North Dakota convention in Bismarck.

Brian Westbury of First Trust Advisors L.P. in Lisle, Ill., said he believes the U.S. economy is supply driven, with producers creating a booming technology products industry that's producing items customers want.

Westbury offered his optimistic view of the national economy during the ICBND's 40th annual meeting Aug. 12-14 at the Ramkota Hotel in Bismarck.

Discussing demand side vs. supply side economics, Westbury said U.S. producers are using technology advances to manufacture smaller and faster products. Despite this consumer-driven production, Westbury said technology and producivity are not given enough credit for helping the national economy. He added that the United States is producing more products with less costs; individuals are accumulating more wealth; and unemployment is low.

Westbury also noted the trade deficit is coming down and he predicts the United States will have a trade surplus in a few years. That surplus, he said, means taxes likely will not be raised.

And Westbury urged delegates not to use Wal-Mart as a gauge for how the national economy is doing.

Turning to the slumping housing market, Westbury said the downturn will continue for the next two years, adding that the real estate and commodities markets have had their run.

While Westbury also said the bond market was over-valued, he believes the choppy stock market is under-valued.

While bankers heard a positive economic forecast, they also listened to information about declining core deposits and the changing funding landscape, as described by Wade Oliver of ICBA Securities in Memphis, Tenn.

Oliver said bankers should develop funding policies that avoid costly and restrictive one-source funding and strive for diversified sources that allow flexibility and lower costs. He added there are "no bad" funding sources, only poorly-managed options.

By Erik Sandin and Dick Miller