North Dakota's Economic Base in 2013

North Dakota’s economy can be measured using numerous economic variables. These variables include population, employment, personal income, per capita income, gross state product, and economic base. Economic base is defined as the value of goods and services exported from an economic unit. Economic base can also be called export base because industries (or “basic” economic sectors) earn income from outside the area. North Dakota’s economic base is comprised of those activities that produce a good or service purchased by someone outside the economic unit. Economic theory suggests that these basic industries bring dollars into the economic unit and these dollars are spent and re-spent in the economy. This results in “non-basic” sectors which exist to serve and support the “basic sectors.” Information presented in this report comes from an ongoing data set used to measure North Dakota’s economy. These data show the change in the size and composition of the state’s economy over time. In this analysis, the level of economic activity is presented in terms of nominal (current) dollars and real (constant) dollars. Nominal dollars represent the value in terms of the purchasing power for each respective year, while constant dollars have the effects of economy-wide inflation removed. Time-series data are often presented in constant dollar values and the growth over time is termed “real” growth. North Dakota’s economy has significant growth in recent years. Since 1990, the state’s economic base has grown from $13.2 billion to $45.9 billion (in constant 2013 dollar values). North Dakota’s economy has typically been reliant on natural resource industries such as agriculture, coal, and oil and natural gas. These industries have provided the impetus for the recent growth in the state’s economy. From 1990 to 2013, the economic base for agriculture grew from $4.9 billion to $10.1 billion (in constant 2013 dollars). This increase was the result of high agricultural commodity prices and favorable production conditions. However, the growth in the petroleum industry has outpaced agriculture. The economic base for the petroleum industry increased from $1.3 billion to $17.4 billion (in constant 2013 dollars) from 2000 to 2013. During this period, the other sectors of the North Dakota economy were also growing, but at a more moderate pace. Much of the economic growth from the petroleum industry has been geographically concentrated, whereas, growth in the agricultural sector has been wide-spread throughout North Dakota. Economic growth by State Planning Region varies significantly across the state. In recent years, oil producing regions have experienced much faster growth in their economic base. It is possible 2013 could be a short-term peak in the North Dakota economy as agricultural and crude oil prices have been declining. Using economic base analysis to document the North Dakota economy could provide valuable insight on how the state’s economy will respond to a changing economic climate.