Weekly Economic Trends and Indicators

Last week, we looked back at the first half of 2025 from a national perspective. This week, we consider the evolving outlook for the Quad Cities regional economy and discuss how the outlook for the second half of the year has changed.

When thinking about the regional economy, keep in mind that under normal circumstances, the most important factor determining regional economic growth is national economic growth. Macroeconomic factors such as consumer confidence, inflation, and interest rates tend to move together anywhere in the country. A borrower in the Quad Cities has similar access to capital markets as a borrower in another U.S. city. Similarly, while inflation may differ slightly between here and other regions due to differences in residential home price appreciation and other factors, regional inflation rates tend to move up and down together.

While this is the case under normal circumstances, there are situations in which regional economic performance can diverge from the national average. This is the case when specific sectors of the economy that are overrepresented in the region are experiencing positive or negative shocks. For more than a year now, the agricultural sector and the manufacturing export sector have been experiencing negative shocks that have caused regional economic growth to lag the rest of the country.

Nationwide, first quarter GDP decreased by 0.5%. However, state-level first quarter GDP data—which was just released at the end of June—showed larger declines across the Midwest. Only 10 of the 50 states were in positive territory, with Michigan being the only state from either the Plains or Great Lakes regions on the plus side (+0.2%). Iowa and Nebraska saw the largest GDP decrease (-6.1% seasonally adjusted annual rate). Nearly four-fifths of the decline in Iowa was due to the agricultural sector. Illinois fared somewhat better, down at only a 2.2% annual rate, one-third of which was due to agriculture. The much larger relative size of the non-agricultural economy in Illinois (due to the Chicago area) can distort the statewide numbers. Downstate Illinois would more closely resemble Iowa and other midwestern agriculturally intensive states.

There is a cyclical component to commodity prices. We experienced a dramatic rise in corn and soybean prices with the pandemic and the Russian invasion of Ukraine. However, the last two years have seen a reversal with prices approaching the cyclical lows of the late 2010s. In relative terms, commodity prices are even lower once adjusted for general price inflation. Trade policy also presents both an upside and downside risk depending on whether the administration’s tariff stance will help open markets to U.S. goods, including commodities, or cause our trading partners to seek other suppliers.

Just as we expect the U.S. economy to show a rebound in the second quarter, the regional economy should also bounce back—but probably a smaller recovery than the national average. The difficulties in agricultural markets were more of a drag on economic growth in the first quarter as overall economic activity slowed, and this should have at least partially reversed in the second quarter as overall activity picked back up. Nevertheless, our region, along with the Midwest generally, is likely to lag further behind the U.S. than we may have expected at the start of the year.

Next week: International update