Ernie Goss Expect Quotations

I expect higher commodity prices and escalating short-term interest rates to push regional growth down significantly in the second half of 2006.

I expect positive, but weaker hiring in the region in the months ahead.

Businesses located in the Northwest portion of Arkansas tended to report stronger economic conditions than businesses in other parts of the state. However, I do expect reasonably solid job growth for most areas through the second quarter of this year.

While our inflation gauge and most national inflation indicators point to somewhat lower inflationary pressures ahead, I expect the Federal Reserve Open Market Committee to raise interest rates at its next meeting on Jan. 31. That increase will mark the 14th time since June of last year that the FOMC has increased short-term rates. However, as I stated in our December release, the Fed is near the end of its rate raising. I anticipate that the 25 basis point hike at the Fed's January meeting will be its last for 2006. Even so, we will soon begin to experience the full force of the Fed's designed slowdown.

Despite difficulties for Missouri's vehicle manufacturing sector, durable goods manufacturers overall continue to report expanding economic conditions. I expect the state's telecommunications industry to experience much improved growth for 2006.

After growing at a very strong pace in 2005, we are now detecting a slowdown in the pace of growth. Just as nondurable goods manufacturers reported improving economic conditions, durable goods producers detailed a pullback in economic conditions for the month. I expect this slower pace of growth to continue into 2006.