February 26, 2019
The Midwest/Rocky Mountain regional economy is enjoying robust growth, according to First National Bank of Omaha’s report, “Global Impacts: The Midwest/Rocky Mountain Economy in 2019.”
Business and consumer sentiment are positive, according to the report. Investment and employment are on the upswing. And the ground is fertile with innovation across the region’s major industries – agriculture, manufacturing and financial services – as well as related fields like information technologies, materials science, energy, healthcare and travel/tourism. But as we look ahead to 2019, questions arise about the maturing business cycle, rising interest rates, unpredictable developments around trade and tariffs and an ongoing slump in global agricultural commodity prices.
Key themes discussed include:
Rising interest rates. “Rising interest rates are becoming a hot topic among our clients, but for now they are not changing their business plans,” said Tim Struthers, senior vice president, Commercial Banking, First National Bank of Omaha. “I would also add that our data and observations suggest that banks have become more aggressive. We are seeing relaxed underwriting, lower spreads and high loan-to-deposit ratios. Banks have ‘loaned up’ amid a several year run of minimal loan losses. All of this suggests we may be nearing the end of the strong growth cycle.”
Global trade and tariffs. Tariffs may be supportive to industries like steel and the auto sector, but they are almost certainly negative for the American agricultural sector, which has boomed in recent decades by exporting to global markets.
The agriculture, manufacturing and financial services industries in the region. For 2019, farm incomes are expected to continue their decline, particularly for corn and soybeans. Farmers in the Midwest/Rocky Mountain region have seen their net income tumble by 40% since a 2013 high, according to a report by the Federal Reserve Bank of St Louis. Manufacturing has enjoyed robust growth in the Midwest/Rocky Mountain region in recent years. Most observers expect this growth to continue, particularly in regards high-value products that incorporate emerging technologies in both product design and production. The financial services industry has steadily grown over recent decades.
What to Expect in 2019. “Our clients are looking at 2019 with positive expectations,” said David Cota, executive vice president, Wholesale Banking, First National Bank of Omaha. “But with rising interest rates and the unpredictable dynamics of tariffs and trade, business leaders are taking into account factors that they have not considered over the past half-decade. Confidence is high, but tempered.”
Source: First National Bank of Omaha, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.
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