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How's the economy doing? Watch the farm machinery market

Agriculture.com Staff 03/09/2009 @ 8:12am

There's not a whole lot of good news coming out of the financial sector these days, and that may not change in the near future.

But, keep your eye on farm machinery and equipment manufacturing and sales, because that marketplace will be one of the early indicators of the economy's footing. That's according to an economic outlook released recently in which Creighton University economist Ernie Goss says economic activity in a nine-state area in the nation's midsection will likely see a "significant pullback" in the coming months.

The Mid-America Economic Outlook comprises a survey of business supply managers and a Business Conditions Index that takes into account employment numbers, manufacturing and sales to reach a figure that shows economic vitality. The latest outlook reveals a Business Conditions Index of 34.6, up slightly from January's 33.5 figure, but well below the 50 mark, which is considered "growth neutral.

"February's reading points to a deepening recession for the region well into the third quarter of 2009," Goss says.

Other sectors, like exports, saw a decline in Goss' latest outlook. But, that's not to say the news is all doom-and-gloom. He says a "confidence index" carried out in the survey shows that economic optimism, while remaining lower than normal, has improved in the last month in the Midwest.

"Looking ahead six months, economic optimism, captured by the confidence index, reflects the economic concern among survey participants with a February reading of 31.5 which was up significantly from January's 23.6," says Goss. “While the reading is up materially, the lack of a coherent and transparent economic policies from the Federal Reserve and the U.S. Treasury continue to hammer business confidence."

There's not a whole lot of good news coming out of the financial sector these days, and that may not change in the near future.

Agriculture plays a big part in clearing up the crystal ball for where the economy is heading, Goss says. That's because the performance of the farm machinery manufacturing sector -- which relies heavily on commodity inputs like steel and is sold into a largely global marketplace -- foreshadows the direction of the global economy in parts of the country where the industry is a major driver of the local economy, like the state of Iowa.

Goss says if farmers are feeling too much pressure for new machinery and equipment in today's economic downturn, they might consider looking to the used marketplace instead. But, prices have also been slow to adjust to economic conditions there as well, says Greg "Machinery Pete" Peterson, publisher of the F.A.C.Ts Report.

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