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The Cedar Rapids (IA) Gazette reports:

A survey of bankers in the rural communities of Iowa and nine other Midwest states found an improving economy from June, but there are concerns about expected farm loan defaults.

The Creighton University July Rural Mainstreet Index measures the economy of the region dependent on agriculture and/or energy. The index climbed to 53.4 this month, up from June's growth neutral 50 and its highest level since June of last year.

"This is the fourth straight month the index has risen, indicating an upturn in economic conditions for the region," said Creighton economics professor Ernie Goss in a news release.

"Improving crop prices pushed the overall index and the economic outlook higher for the month."

On average, bank chief executive officers reported farmland prices had fallen by 6.8 percent over the last year. Seven percent indicated that prices in their area had risen over the same period.

The bankers were asked about farm loan defaults over the past year and anticipated defaults over the next year. Only 11.9 percent reported farm loan defaults were up for the year, but 54.8 percent expect farm loan defaults to rise over the next 12 months.

"Farmers are holding their own, but we expect a few default problems this fall," said Pete Haddeland, CEO of the First National Bank in Mahnomen, Minn.

Despite weaker crop prices and pullbacks from businesses with close ties to agriculture and energy, Rural Mainstreet businesses continue to add workers to their payrolls. The July hiring index dipped slightly to a still healthy 60.3 from June's 61.5.

"Rural Mainstreet businesses continue to hire additional workers," Goss said. "Rural Mainstreet communities are growing jobs at a solid annual pace of approximately 1 percent, primarily in businesses not linked to agriculture or energy."

The confidence index for July, which reflects expectations for the economy six months out, expanded to a weak 46.6 from June's 45.9.

"Recent improvements in agricultural commodity prices pushed bankers' economic outlook to a weak, but higher level," Goss said.

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