11/27/06 Slower economy and agriculture

Farm and Ranch November 27, 2006 The latest economic growth projections from the White House are for a slower economy than previously forecast. The administration now says gross domestic product will grow 3.1 percent from the 4th quarter of last year to the 4th quarter of this year and growth in 2007 will be 2.9 percent, down from an earlier prediction of 3.3 percent. Keith Leggett, Sr. Economist for the American Bankers Association says a slower growing economy is not necessarily bad news for agriculture. Leggett: "I would not say that a slowing in growth really portends bad news for the farm economy. I think that actually if the economy had continued to grow as robustly as it had in the 1st quarter of this year it would be bad news for the farm economy in 2007 because that would really imply that the Federal Reserve would still be ratcheting up interest rates and that would really impose an increase in cost on the farm borrower and it would also signify that energy costs would remain elevated. So therefore this is a positive environment." Leggett is predicting the Federal Reserve will cut its benchmark rate in the first half of 2007. He says the yield curve will remain very flat. Leggett: "You are not going to see much difference between a three month treasury versus a 10 year treasury bill as far as interest rates." I'm Bob Hoff and that's the Northwest Farm and Ranch Report on the Northwest Ag Information Network.