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Update on the Agriculture Economy

Dr. David Kohl
Educational Opportunities: 
Grain, Dairy, Swine, Beef, Timber, Young, Beginning Farmers, Women in Ag, AgriBusiness
Home > Education & Events > July 2018 > Update on the Agriculture Economy

Hi, I'm Dr. David Kohl, Professor Emeritus and academic hall of famer from Virginia Tech, Blacksburg, Virginia.
What’s the state of the state of the US and the global economy, and how does that impact the agriculture economy? This is a question that I am often asked, not only by farmers and ranchers, but agricultural lenders and general policy makers. One of the things for the US economy, particularly the coastal and the urban economy, it is full steam ahead. All the lead economic indicators, like the LEI, the lead economic indicator, the PMI, purchase manager index, and consumer spending; all of these factors say we have a very, very strong economy.
One of the things that I'm watching very closely is consumer sentiment out of the University of Michigan. And if that number stays above 90, which it is and has been for the past 24 to 27 months, where the US economy is driven by the consumer, that'll be a close metric to watch.
It's interesting, we are now on the second longest winning streak as far as economic expansion in the United States of America, and if we hit another 12 months, we're going to be a record breaker above 120 months.
However, there are some storm clouds on the horizon. Some of the trade issues is creating uncertainty into the world economy, and we're seeing economies like China and some of the major economies in Europe starting to slow down. We're really going to have to watch that.
And then the second element is, how fast are we going to raise interest rates? And interest rate rises in a debt-ridden world economy could have a dramatic impact on the health of the US economy. But bottom line, remember. In the US, when the coastal economies and urban areas are doing well, the farmer and the rural sector tend to struggle, and that is the period that we're in today.
So again, moving forward, interest rate increases and all of the other elements are going to be pegged off the coastal economies. So it's going to be interesting to see where we go throughout the rest of the year.
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