Tuesday, April 17, 2012

KC Fed report: High commodity prices helped rural economy in some ways, hurt in others

Rural economies languished in the midst of a commodity boom in 2011, which was buttressed by increased global demand, Jason Henderson and Maria Akers report for The Main Street Economist, a publication of the Federal Reserve Bank of Kansas City. Rising oil prices sparked domestic drilling and increasing global food demand led to record highs for U.S. agriculture exports, creating pockets of "robust growth" in mining and agriculture communities. However, areas of weakness, including rising energy prices, a weak housing market and tight government budgets, hindered rural growth, they report.

Despite those challenges, Henderson and Akers write rural America is expected to see more gains this year because commodity prices are "expected to provide a foundation for rural prosperity." However, the areas of weakness continue to cast uncertainty. Henderson and Akers conclude that rural economic growth depends on U.S. economic growth. They write that "robust energy activity" could bolster rural economy this year, citing Energy Information Administration data that oil prices will rise 6 percent, and Bureau of Land Management data showing 20 percent more land auctioned for oil and gas leases last year than in 2010.

For more on the health of rural economy and projections about its future, read the report here.

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