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A ROBUST RURAL ECONOMY IN 2006? The U.S. rural economy in 2005 was able to overcome high energy prices and natural disasters, including hurricanes and a drought, to post another strong year overall. Will the resilience of 2005 translate into another strong year in 2006 for U.S. farmers and the Main Streets of rural America? Jason Henderson, a senior economist at the Federal Reserve Bank of Kansas City’s Center for the Study of Rural America, explores the issue in “A Robust Rural Economy in 2006?” The article is featured in the first quarter edition of the Bank’s Economic Review. Henderson reviews the rural economy in 2005, noting that strong job growth in rural communities continued the recovery in the nonfarm rural economy, while the farm sector enjoyed its second-largest net farm income year on record, reaching $71.5 billion. Looking to 2006, he writes that the stage is set for another year of economic growth. Solid economic growth at the national level should support job and income growth at rural businesses. Meanwhile, strong demand is expected to keep livestock prices at or above historical levels. Crop prices are expected to remain weak, Henderson writes, but revenue losses likely will be offset by government payments. The most significant risk to the outlook, Henderson writes, is energy prices. Higher oil and natural gas prices translate into higher costs for factories, farms and households. However, he also notes that higher energy prices may fuel new investment in rural America through opportunities in the production of ethanol and soy-based bio-diesel. The article is available on the Bank’s Web site at www.KansasCityFed.org. ### Return to
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