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Jun. 27, 2011 Source: Creighton University news release The June overall index for the Rural Mainstreet economy moved above growth neutral 50.0 for an eighth straight month indicating that the rural agriculturally dependent areas of the region continue to expand at positive pace, according to this month's survey of bank CEOs in a 10-state region. Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, rose to 56.0 from May's healthy 54.9 but down from 59.4 in April. Creighton University economist Ernie Goss said, "Even though the Rural Mainstreet economy is expanding, I expect flooding and weather related issues to slow growth in the months ahead." Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005. Farming: While the farmland price index slipped in June to 62.0 from May's 75.0, it remained above growth neutral for the 17th straight month. One year ago, the farmland index stood at 54.7. The farm equipment sales index slumped to a strong 63.1 from 65.9 in May. "We are beginning to see some of the air exiting the farmland price bubble. In my judgment, this is not a bad outcome. A significant upturn in the value of the dollar stemming from the European debt crisis could drive the dollar higher and agricultural commodity prices lower. This would weaken farm income growth and take even more of the air from the bubbles we have been seeing in farmland and farm equipment sales," said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton. This month bankers were asked who the major buyers for farmland were in their area over the past four years. Almost one-third, or 31 percent, reported that outsiders were the primary buyers for local farmland. More than two-thirds, or 68 percent, indicated that most buyers were local. The remaining one percent was unsure of the source of farmland purchases. Kory Schow, CEO of the Bank of Keystone in Keystone, Nebraska said, "It is largely well-established operators who are leveraging strong balance sheets to obtain ag (agricultural) land. At one time it seemed most buyers were out-of-town using 1031 (Real Estate) exchange money to make ag land purchases." Almost six of 10 bankers, 59 percent, indicated that a crop price drop of 20 percent or more would mean negative returns for farmland. Many bankers expressed concern regarding the impact of the Missouri River flooding on the economy. As summarized by Larry Winum, president of Glenwood State Bank in Glenwood, Iowa, "The current and potential flooding problems will certainly have an adverse economic impact on sectors of agriculture, business, and on our communities along the Missouri River. A sad situation for a lot of people." Todd Douglas CEO of First National Bank in Pierre, S. D., indicated that he expects additional negative fallout from the flooding on tourism for large portions of the region. Banking: The loan volume index for June expanded to 59.0 from 55.5 in May. The checking deposit index advanced to 59.7 from May's 58.2, while the index for certificates of deposit and other savings instruments decreased to 41.7 from 44.6 in May. Dale Bradley, CEO of Citizens State Bank in Miltonvale, Kan., indicated that many bank regulators were expressing concerns to his fellow bankers about farm production, input and land prices. However, Bradley reported that this is fairly common at this point in the production cycle. Jobs: For a seventh straight month the Rural Mainstreet economy added jobs, albeit slowly, with a June index of 51.5, down from May's 54.2. "The pace of job growth for the Rural Mainstreet economy is more than double that of the urban areas of the region. While the growth is still less than what you normally see in a recovery, it has been trending up for most of 2011," said Goss. Confidence: The economic confidence index, which reflects expectations for the economy six months out, slumped to 55.3 from May's strong 63.7. "Even though confidence remains fairly robust, flooding and other weather related issues in areas of the region eroded confidence among some of the bankers," said Goss. Home and retail sales: For the fourth time since June of last year, the home sales index climbed above growth neutral. The June index dipped to 53.0 from 54.3 in May. The retail sales index for June slipped below growth neutral to 47.0 from May's tepid 50.1. "In terms of retail sales, higher fuel prices continue to restrain retail sales for Rural Mainstreet vendors," said Goss. Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of the 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included. This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy. Tweet |
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