In the past two columns, I have given a perspective on the less-filling side of the economy, or the reasons for a downturn. Now I will turn the table and discuss factors for an economy that does not fall into a recession.
First out of the gate is the continuation of a weak dollar that bolsters agricultural and manufacturing exports. Areas of the country with a focus in these two areas would continue to thrive. The question becomes: Will it be enough?
Second, the housing market bottoms out and financial institutions stabilize bringing the perception of confidence to the U.S. and world economy. Lenders and regulators would loosen credit standards, which in turn could be the stimulus that results in a return of the housing industry and consumer spending.
Third, another stimulus package by the new administration could turn the tables. This may provide enough of a boost to increase consumer spending. A stimulus package coupled with lower oil prices, hence gas and fuel prices, provides more spending dollars for the consumer.
Fourth, inflation subsides because of decreasing commodity prices – the Federal Reserve decides to lower interest rates, which lowers the prime rate reducing the cost of funds to prime time business entities.
In conclusion, the U.S. is coming into an extended period of economic moderation, which will result in a reprioritization of spending and lifestyle habits. Extreme volatility may occur in some sectors of the economy because of economic, political, weather and natural and manmade events. This will result in more economic turbulence and uncertainty.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at [email protected]