Monthly Economic Headlines

January 15, 2025

January economic headlines

Federal Reserve (Fed) eases monetary policy.

The Fed cut interest rates by 25 basis points in its December meeting, bringing the current range to 4.5%-4.75%. While inflation has slowed, it remains above the Fed’s 2% target. Federal funds futures and the Federal Reserve Board both suggest the Fed will cut rates by an additional 50 basis points in 2025.

Fed shifts monetary policy.

Fed Chair Jerome Powel indicated that rather than establishing a predetermined set of rate cuts, the Fed will wait for economic data to weaken and/or inflation to slow before acting. Current rates are considered neutral; neither restrictive nor accommodative. The Fed’s dual goals of bringing down inflation and keeping the unemployment rate low are thought to be in balance at this time.

President Trump’s election creates uncertainty.

Pro-growth changes such as tax cuts, reduced regulations and initiatives to improve government efficiency may be offset by higher tariffs and policies that reduce immigrant labor. While forecasters generally see these effects evening out in the medium- to long-run (beyond 2-3 years), there is disagreement as to their short-term impact on Gross Domestic Product (GDP) and inflation.

Consumer spending drives economic growth.

Real GDP exceeded expectations and grew by about 2.7% for the second half of the year, due to strong consumer spending in Q3. The unemployment rate remains relatively low, and nonfarm payrolls increased by nearly one million despite three catastrophic hurricanes and multiple labor strikes. Strong consumer spending was in part due to rising equity markets, which helped to support consumer confidence and offset the impacts from inflation and higher interest rates.

Positive investor sentiment drives gains in equities.

Investors remain optimistic about future growth despite persistently elevated interest rates, softening employment and other concerns. The major indexes have established several new record highs over the last few months. As of Jan. 9, the S&P 500 Index is up about 23% year over year (see chart below). Some investors worry growth may have occurred too quickly, and values may be excessive.

S&P 500 Index

Source: Nasdaq.

Data and trends

This section presents select economic indicators to help producers gauge the direction of their business. These metrics reflect current market dynamics and their potential impact on operations. Come back each month to stay informed and adapt swiftly to the ever-changing economic landscape.

WTI crude oil and diesel prices

Source: U.S. Energy Information Agency.

Observation: Oil prices increased mid-January as markets anticipated disruptions from U.S. sanctions on Russia, which target their oil and gas revenues. This was coupled with higher demand due to cold weather in the Midwest and Europe. Despite these factors, supply and demand conditions seem relatively balanced.

About this indicator: The West Texas Intermediate (WTI) crude oil price is a benchmark for oil pricing and influences the cost of fuels like diesel, which is essential for running farm equipment and transporting goods.

Transportation price indices

Source: Bloomberg. Freightos. U.S. Bureau of Labor Statistics.

Observation: Container shipping costs rose as buyers frontloaded cargo ahead of Trump's inauguration and China's Lunar New Year. West Coast trucking rates also increased moderately due to this frontloading. Meanwhile, bulk vessel prices dropped significantly due to lower Chinese demand, excess vessel capacity and the stabilization of Panama Canal crossings.

About this indicator: The long-haul trucking index measures the changes in trucking freight rates over time. The Baltic Dry Index measures the average global cost of shipping bulk materials, including grains, sugar, metals, and others. The container index measures the average global cost of shipping containers. Shipping prices vary by route and carrier size based on market dynamics and may move independently from global averages (i.e. the cost to ship goods from the West Coast to Asia could remain flat even if global rates are increasing).

DXY Index

Source: Bloomberg.

Observation: The dollar has climbed to two-year highs, driven by stronger-than-expected employment data in early January and the general perception that President Trump's reelection is positive for the U.S. economy.

About this indicator: The DXY index measures the strength of the U.S. dollar against a basket of foreign currencies. The strength of the U.S. dollar impacts the competitiveness of agriculture producers in foreign markets. As the dollar strengthens, U.S. producers become less competitive, and vice versa.

Grain and oilseed freight index

Source: International Grains Council.

Observation: Shipping costs for grains and oilseeds have declined the last several months, which should benefit West Coast producers. Costs associated with U.S. and Europe grains track closely, while those from Brazil are notably more expensive.

About this indicator: The International Grains Council produces the Grain and Oilseed Freight Index to better inform the global agriculture economy on bulk shipping costs. While the Baltic Dry Index is the typical indicator used when tracking bulk shipping rates (see transportation chart above), this index isolates the costs for shipping grains and oilseeds.

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