State Economic Watch

The Ag sector continued to be under financial pressure in the second quarter but, according to the economists at the Federal Reserve Bank of Kansas City , “the pace of decline in farm loan repayment rates and farm income slowed slightly in recent months”. Based on the results from the second quarter Federal Reserve Surveys of Agricultural Credit Conditions, the economists conclude that while loan repayment rates continued to decline in the quarter, the pace of the decline has moderated, as has the rate of decline in farm income. Nevertheless, the survey results indicate that lenders continue to tighten credit standards. Despite all of this, farm values continue to remain strong, as the economists report that “the value of nonirrigated cropland across all regions increased by an average of about 2.5% from the previous year during the second quarter”. 

In the most recent economic forecast , released yesterday by the Oregon Department of Administration, the Oregon state economist reports that “state level economic growth, which has lagged the national trend through all of 2025, looks to have largely caught up to the U.S.”, and that “the state’s economic outlook has improved somewhat in the immediate n ear-term compared to the prior forecast iteration”. The resultant upside surprise in personal income tax collections has boosted the revenue outlook for the state’s general fund. 

The summer improvement in home prices was confirmed in the latest release of the S&P Cotality Case-Shiller Indices. The National Composite Index (NSA) increased 1.5% y/y in June, compared to the 1.2% annual gain reported in the prior month. Nevertheless, seven metros in the 20-City Composite Index, primarily concentrated in the West and Sunbelt regions, posted y/y losses. Seattle saw the largest decline at -1.95%, followed by Las Vegas (-1.90%), Denver (-1.24%), Tampa (-1.19%), Phoenix (-0.88%), Dallas (-0.66%), and Portland (-0.38%). Growth rates posted by the top five cohort illustrate the wide geographic disparity in the current US housing market, with home prices in Chicago increasing 6.9% y/y, New York 4.79%, Cleveland 4.13%, San Francisco 3.22%, and Boston 2.71%. 

Manufacturing activity in the Philadelphia area increased in August, but services activity declined according to the two recent surveys from the Federal Reserve Bank of Philadelphia. Its August Manufacturing Business Outlook Survey indicates expansion in regional manufacturing activity, with the top line general business activity index increasing to 47.4 in August from 41.4 in July and, notably, the employee count index rose to 27.9 from 10.0 in the previous month. Similarly, the forward-looking six-month expectations indexes rose significantly with the general business activity index increasing 39 points to 73.6, its highest level since August 1983.  The story was entirely different in the services sector, with the Philly Fed’s Nonmanufacturing Business Outlook Survey registering m/m declines in almost all of its indexes in August. The top line general business activity index fell from a weak +7.4 in July to -10.6 in August. The employee count indexes were barely positive, and t...

  After five consecutive quarters of deceleration in home price appreciation, today’s  release of the FHFA House Price Index (HPI) report for 2Q2026 reflects a modest improvement. The national Purchase-Only FHFA HPI (SA, nominal) increased 2.13% y/y in the quarter compared to 1.88% in 1Q2026 and 2.03% in 4Q2025. Nevertheless, this is a far cry from the index’s most  recent peak y/y growth rate of 6.42% in 1Q2024 and its historic peak of 18.17% in 3Q2021. The states with the strongest y/y growth in house prices were diverse, with Alaska, Vermont, Hawaii, Illinois and West Virginia comprising the top five states. Four states posted y/y declines in their respective HPI indexes led by New Mexico, followed by Washington, Colorado and California. The below exhibit is from the FHFA release. Source: FHFA

The US Bureau of Reclamation’s Final Environmental Impact Statement on the future management of the Colorado River has significant negative implications for the Arizona economy according to a statement by the state’s Department of Water Resources . This is a complex situation as the long term drought in the west has raised concerns about the operations of the Glen Canyon and Hoover dams. The inability of the seven states that draw water from the Colorado to negotiate a new water usage agreement risks the imposition of a federal government solution, which could have significantly impact the economies of Arizona, California and Nevada. This article from the Arizona Mirror provides a good overview of the situation.