Business leaders across the northern tier of the country are more pessimistic about the economy than they’ve been in nearly two decades, according to a survey released Wednesday by economists at the Federal Reserve Bank of Minneapolis.

This year’s edition of the annual survey, which focused extensively on the global credit crisis and its effect on both borrowers and lenders across the region, predicted that the economic downturn will continue well into next year. The economists said the outlook for local economies is dismal, “the worst in the 18-year history of the business leaders poll.”

“The district economy will continue to decline well into 2009,” said economist Rob Grunewald.

The good news for Montana is that most indicators show the economy here will weather the storm better than the rest of the Fed’s Region 9, which in addition to Montana includes the Dakotas, Minnesota, western Wisconsin and the Upper Peninsula of Michigan.

The survey generally indicated the economy will be worse in the eastern half of the district and comparatively stronger in Montana and the Dakotas. That’s based largely on a positive outlook for agriculture as well as strength in the mining and natural resource sectors.

However, the economists cautioned that the survey didn’t include data from October and November, when the price of oil and other commodities plunged, and there’s a chance 2009 will be worse than the survey predicted.

Montana business leaders are more optimistic about 2009 than their peers in the eastern part of the region, although not as positive as business leaders in the Dakotas.

Employment is expected to grow slightly in Montana in 2009, with a concurrent, modest decrease anticipated in the unemployment rate.

The survey of more than 2,000 business leaders and 300 finance professionals found that financial institutions across the region have money to lend, but that credit isn’t as easy to come by as it was a few years ago.

“These surveys in general told us that credit is still available, but the credit environment has changed,” said Ron Wirtz, an economist with the Fed. Wirtz said there’s lower demand for credit from both businesses and consumers, that banks are holding borrowers to higher standards and that the quality of those who are seeking credit has declined.

“Credit ratings matter again,” he said. “Banks use a variety of standards to gauge credit risk, and those standards are rising.”

In the housing sector, economists expect the downturn to continue.

“The housing and residential real estate markets have been in the doldrums, and recovery may be more than a year away,” economist Toby Madden said.

Montana is the only state in the region where homebuilding is expected to increase in 2009, after falling by 25 percent in 2008.

The Fed will revisit its outlook in February, when full data from the fourth quarter of 2008 is available.

Reporter John Harrington: 447-4080 or john.harrington@helenair.com.