Economic forecasters at the North American Ag Lending Conference last week in Omaha painted the following picture for 2006:

  • Continued economic growth. Estimated growth in gross domestic product (GDP) is as follows: U.S., 3%; China, 8 %; India, 6 %; Latin America, 3-3.5 %, Canada, 4 %. Europe continues to show GDP growth but at a very slow pace. That slow growth will put pressure on Europe’s trade imbalance with its trading partners.
  • Low inflation to continue globally.  In the U.S. one of the biggest threats to inflation is increasing labor cost. Wage growth is already climbing due in part to increased wages and bonuses needed to lure workers back to the GulfCoast areas hit by Hurricanes Katrina and Rita.
  • Modest increase in interest rates expected globally.  In the U.S., once the Fed reaches a neutral interest rate – one that does not encourage nor discourage business growth and investment – the federal funds rate will probably hold steady at about 4.5 percent.  

The forecast was presented by Mike Swanson, ag economist with Wells Fargo Bank in Minneapolis, Minn., and Rick Egelton, senior vice president and chief economist at BMO Financial Group in Toronto, Canada.

Additional points on the U.S. economy from Swanson include that employment growth for 2006 is expected to be about 1.4 percent and that by the end of 2006 unemployment should be between 4.6 percent and 4.8 percent.

It is important to note, Swanson said, that employment growth will average 1.6 percent this year. That’s a net growth in jobs overall despite the hurricanes.