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Dec. 19, 2011 Source: Creighton University's Mainstreet Economy For a third straight month, the Rural Mainstreet Index (RMI) increased. December's reading from a monthly survey of bank CEOs in agriculturally dependent areas in a 10-state region climbed to its highest level since June 2007. Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, advanced to 59.7 from 58.4 in November and 52.9 in October. According to Creighton University economist Ernie Goss, "Growth in the areas of the region and country tied to agriculture and energy are outpacing urban areas. Our survey is detecting a very healthy Rural Mainstreet economy with the gap between urban and rural widening. Bankers reported that approximately 60 percent of agricultural producers have contracted or sold their 2011 production. Global demand and alternative energy generation are driving the Rural Mainstreet economy higher." Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005. "Despite our strong December report, I expect Eurozone problems to slow growth in agriculture and energy due to a strengthening dollar and weaker exports. This will tend to push agriculture and energy commodity prices lower in the first half of 2012," said Goss. Farming: The farmland price index rose to a record high in December, climbing to 84.1 from November's very strong 75.4. "This is the 23rd straight month the index has been above growth neutral. The farm equipment sales index expanded to 73.8, its highest level since February 2008, and up from 68.4 in November," said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton. This month bankers provided the current average cash rent per acre in their area. Across all 10 states, the average cash rent was $191, ranging from $105 in Kansas to $269 in Illinois. Approximately 22 percent of bank CEOs reported average per acre cash rents above $250. Said Don Reynolds, president of Regional Missouri Bank in Salisbury, Mo, "Land prices appear to continue to rise. But, we noted that a few small tracts that were desired by multiple cash rich buyers appeared to distort people's thinking." Banking: The loan volume index for December increased to 50.8 from November's 44.2. The checking deposit index, while still healthy at 68.9, was down from November's 81.7, and the index for certificates of deposit and other savings instruments dipped to a very weak 37.0 from 41.7 last month. "Tepid loan demand, and healthy checking deposits are consistent with a very strong farm economy across the region," said Goss. Hiring: December's hiring index advanced to 54.6 from 53.4 in November. "Year over year job growth for Rural Mainstreet communities is approximately 1.4 percent compared to 0.8 percent for urban areas of the region," said Goss. Confidence: The economic confidence index, which reflects expectations for the economy six months out, climbed to 61.8 from November's 57.5. However, the failure of financial derivative giant MF Global has affected agricultural producers in the region. Approximately 23 percent of bankers said that the firm's bankruptcy had a negative impact on their agriculture customers. On the other hand, 52 percent indicated no impacts with the remaining 25 percent reporting that the impacts were unknown at this time. "I expect the fallout from this bankruptcy to play out in the weeks and months ahead with negative impacts growing as the unknown becomes known," said Goss. Home and retail sales: For a fifth straight month, the Rural Mainstreet home sales index dropped below growth neutral to 46.2 from 46.7 in November. The retail sales index for December bounced to a record high 61.6 from 53.3 in November. "The record high retail sales index bodes well for the holiday buying season for merchants in the region while rural housing markets remain weak," 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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