ICYMI, the Fed raised interest rates at the end of July after a negative GDP in the second quarter (ouch). Queue Paul Revere on his horse galloping across the countryside shouting, “A recession is coming! A recession is coming!”
Not quite? While two consecutive quarters of a negative GDP might make us think “RECESSION!”, the Federal Bureau of Economic Research ultimately decides. Meanwhile, pressure is rising amidst crazy inflation and climbing interest rates.
Confused? Before they officially “call it” they’re looking for “more signs of economic pain than what we’re seeing,” according to Tom Bailey, Senior Analyst at Rabobank.
It won’t be a “normal” recession if there is one. “The economy is not going to lose a lot of jobs,” said Jeffrey Dorfman, professor of ag and applied economics for University of Georgia’s College of Agricultural and Environmental Sciences (CAES). He explained that businesses spent the last two years trying to hire and retain workers, so they want to keep them busy for a while.
What does this mean for ag? Fortunately, people still need to eat. So while folks may cut down on their restaurant expenditures (restaurant sales are already down 10%), they’re still buying food (obviously).
Soundbite: “The majority of study about how agriculture responds to recession shows that the part of agriculture that contributes to the economy does not drop as much as the rest of the economy during recession, staying relatively stable,” said Yangxuan Liu, also with Georgia’s CAES.
The good news? Commodity prices should stay intact due to tight global supplies. And *typically* agriculture is more buffered from recession. At this point, neither current CPI nor GDP data points to a long recession.