By BECKY GILLETTE
In the year ahead, agriculture-heavy Mississippi faces headwinds from declines in commodity prices that have caused a lot of concern in farm circles. State Economist Dr. Darrin Webb said 2015 was not a particularly good year for ag in Mississippi and elsewhere. The USDA expects U.S. net farm income to be the lowest since 2002 and less than half of what it was two years ago.
“While nationally production of some crops reached record or near-record levels, such as corn and soybeans, these large crops depressed prices compared to recent years,” Webb said.
“Moreover, weather in the state such as the drought conditions in late summer and rain at less than ideal times reduced the size of some producers’ crops, limiting their ability to offset lower prices. At the same time, production costs to date haven’t fallen as much relative to commodity prices. As land rental rates have changed little, a number of Mississippi producers will likely experience cash flow issues. The outlook for prices in 2016 not expected to rise much.”
The state had a 0.5 percent gain in real Gross Domestic Product for the state in the fall 2015 and less than a one percent gain in GDP is expected for the year.
“So, after two years of contraction, we think the Mississippi economy has mustered less than a one percent growth in real GDP,” Webb said. “That is very anemic. Employment for the year is also running about 0.9 percent higher. Income growth continues to lag that of the nation. We know that we began the year slow, improved in the middle of the year, but had a slow ending. Part of the sluggishness can be traced to the continued decrease of construction activity on the Kemper Plant. Manufacturing growth has also moderated in light of a rising dollar and slow global economy. The mining sector has taken a hit, as well, as a result of the falling oil prices.”
Growth is expected to strengthen in 2016, reaching 2.2 percent in the state and 2.9 percent in the nation. Webb said the slowdown in construction has bottomed out, and there should be gains in 2016.
“The Mississippi manufacturing sector has proven to be fairly resilient, but will face increased pressure in 2016 if the national manufacutring sector does not soon recover from its recent contraction,” Webb said.
The Federal Reserve was expected to raise rates as this article went to press. Webb said the increase will likely be a small adjustment that is more symbolic than substantive (a quarter point).
“The idea is to signal an improving economy and shore up the Fed’s credibility (they have been planning a rate hike all year),” he said. “The markets have likely taken such a rate hike into account. I would not be surprised by another small hike in the spring, and then the Fed will likely hold off any further gains until after the after the elections. This will give them an opportunity to gauge how the economy and the markets have responded to hikes.”
The year ahead could be a good one for entrepreneurs. Tony Jeff, president and CEO of Innovate Mississippi, said access to capital is getting much easier for startups – especially access to capital outside of Silicon Valley. Investors can now stay “connected” to investments all over the country, so they are more willing to invest outside of their local area.
“Valuations of technology and innovation companies are up, so technology entrepreneurs are asking for and receiving more capital for lower percentages of their companies,” Jeff said.
A positive track record will still be of great value.
“Money will flow more easily than ever to serial entrepreneurs, but will remain elusive for first-time entrepreneurs,” Jeff said. “Crowdfunding is going to dramatically increase the pool of investors for start-ups, but increased funding won’t equal much more success for companies. That means more companies will get out of the starting gates because of early money, but more will also fail shortly after launching.”
Much of Mississippi’s economic activity comes from small businesses, and things are looking up in downtowns across the state, said Jeannie Waller Zieren, director of training and information, Mississippi Main Street Association.
“Downtowns are still ‘hot’ because people still crave a sense of place and connectedness that Main Street offers,” Zieren said.
Positives she sees important to forecasting how are Main Streets will weather 2016 includes Historic Tax Credit Incentives continuing, which impacts both small, rural towns and large urban areas.
Small, independent businesses are establishing an active online presence where customers can purchase merchandise and goods online. A popular trend is having an Instagram presence — customers can purchase items directly from social media.
Another area where she sees potential progress is attracting investors to buy and restore historic, commercial properties and lease the space to small businesses and develop upper floors into residential living.
“Investors in larger, urban areas need to be educated on utilizing new market tax credits and investors in large and small towns to utilize historic tax credits,” she said. “Downtown residential is still a huge trend and makes a significant economic impact in any town or city. Businesses follow residents.”
Once the restoration has taken place, efforts are needed to sustain that growth and momentum.
Another trend is lighter, quicker, cheaper projects.
“Every Main Street program should have a long-term vision and goals,” Zieren said. “But, quick and easy projects are needed to encourage the long haul. These would be your ‘low hanging fruit’ – the projects that make a quick impact such as enhancing public spaces and scheduling easy, fun events like the Victorian Christmas in Canton or ice skating downtown in Greenwood.
Despite the concerns about the growth in Internet sales during the holidays, Zieren said small businesses did really well with Small Business Saturday.
“Small Business Saturday shoppers spent $16.2 billion at independent retailers — a 14 percent increase from last year — making it the biggest one yet,” Zieren said.
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