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RURAL MAINSTREET ECONOMY IMPROVES IN JUNE
Source: Creighton University news release

The Creighton University Rural Mainstreet Index rose above growth neutral for July from June's tepid reading, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The July Rural Mainstreet Index (RMI), which ranges between 0 and 100, climbed to 53.4, up from June's growth neutral 50.0, 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. Improving crop prices pushed the overall index and the economic outlook higher for the month," said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Farming and ranching: The farmland and ranchland price index for July increased slightly to 31.4 from June's 31.1. "This is the 20th straight month the index has moved below growth neutral. But, as in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices," said Goss.

This month bankers were asked how much farmland prices had changed in their area over the last year. On average, bank CEOs reported prices had fallen by 6.8 percent over the past 12 months. Seven percent indicated that farmland prices in their area had expanded over the year.

"Approximately 14 percent registered a decline of 1 to 4 percent, 34.9 percent reported a price reduction of 5 to 9 percent and 27.9 indicated farmland prices had decreased by 10 to 20 percent. The remaining 16.3 percent reported no change in farmland prices over the previous 12 months," said Goss.

The July farm equipment-sales index rose to a very weak 17.9 from June's record low 12.5. The index has been below growth neutral for 24 straight months. "With farm income expected to decline for a second straight year, farmers remain very cautious regarding the purchase of agricultural equipment," said Goss.

Banking: The July loan-volume index declined to 72.1 from 79.9 in June. The checking-deposit index rose to 53.4 from June's 48.0, while the index for certificates of deposit and other savings instruments was unchanged from June's 38.6.

This month bankers were asked about farm loan defaults over the past year and expected defaults over the next year. Only 11.9 percent reported farm loan defaults were up for the year. However, 54.8 percent of bankers expect farm loan defaults to rise over the next year.

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

But in some areas, farm loan defaults remain rare. For example, James Shafer, CEO of The First National Bank in Tremont, Ill., reported, "(My bank) has not had a farm loan default in the 40-plus years I have been here."

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

Confidence: 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," said Goss.

Home and retail sales: The July home-sales index soared to 73.3 from June's 68.1. The July retail-sales index increased to 53.4 from 50.0in June. "This may be a signal that we are finally recording increases in retail sales stemming from the downturn in fuel prices," said Goss.


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