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Corn+Soybean Digest

Economy Watch

The past few weeks have resulted in treks through Nebraska, Kansas, Utah, Minnesota and Wainwright, Alberta. Everyone wants to have an update concerning the status of the U.S. economy.

First, the housing market is imploding on the East and West coasts. Housing inventory is exceeding 10 months of supply with a number of homes being taken off the market because they are not selling. This trend appears only to be in the beginning stages, and there is an increasing probability that this trend will result in long-term adjustments lasting multiple years. This could result in a reduction of consumer spending, particularly in the first and second quarters of 2008.

Experts have failed to consider the demographic trends of home purchases. The next generation (Gen-Xers,) does not want the fancy homes and the second homes. First, they cannot afford them and second there is desire amongst this generation for simplicity. Will this lead to homes being purchased by international buyers, particularly in times of a suppressed dollar?

In the next six months, observe jobless and unemployment rates. Should the rate increase to 5.5% or greater, the U.S. could be in for an old-fashioned recession starting on the coast and moving toward the heartland. Only time will tell how these adjustments to the economy will affect economic health.

Editor’s note: Dave Kohl, The Corn And 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 sullylab@vt.edu.

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