May 17 - Growth strengthened for the Rural Mainstreet economy over the past month according to the May survey of bank CEOs in a 10-state area.
Overall: The Rural Mainstreet Index, which ranges between 0 and 100 with 50.0 representing growth neutral, climbed to 58.8, its highest level since December 2012, and up from April’s healthy 58.3.
Bankers reported on the most significant risks to the Rural Mainstreet economy for 2013. Approximately 60 percent reported that low agriculture commodity prices are the greatest threat to the farm-based economy for 2013. Another 16.7 percent indicated that drought is the number one threat to the rural economy for 2013 while 15.2 percent reported that the bursting of the farmland price bubble is the biggest economic threat for the agriculturally dependent economy for 2013.
On a positive note, Charles Helscher, president of Farmers Savings Bank in Keota, Iowa, reported, “The drought appears to be over in southeast Iowa, at least temporarily.” However he indicated that excessive rain has delayed planting and some bottom ground may not be planted due to flooding.
Farming: The farmland price index dipped to a still strong 62.1 from 66.9 in April. The farmland-price index has been above growth neutral for more than three years. However, the index has now declined for the fifth time the past six months. The farm-equipment-sales index declined to 52.4 from 57.3 in April.
“Since the beginning of the year, the U.S. dollar has climbed in value by 5 percent,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University. “This has been a factor pushing farm commodity prices downward. For example, corn prices have slumped by almost 10 percent since December of last year. This trend, which I expect to continue in the months ahead, has taken a bit of the air out of farmland price growth and farm-implement-sales growth.”
Banking: The loan-volume index moved above growth neutral for the month. The index rose to 72.1 from 66.0 in April. The checking-deposit index declined to 54.5 from April’s 63.0 while the index for certificates of deposit and other savings instruments advanced to a weak 42.6 from last month’s 40.4.
“We are recording more and more reports of negative economic fallout from Dodd-Frank,” said Goss.
Larry Rogers, president of the First Bank of Utica, Utica, Neb., said, “Dodd-Frank and new regulations from the Consumer Financial Protection Board are strangling us. New regulations are going to cause us to quit making residential real estate loans hurting the people these regulations are supposed to be helping.”
Hiring: May’s hiring index expanded to 59.8 from April’s 57.5. “Despite solid job creation across Rural Mainstreet beginning in January 2011, rural areas are still not back to pre-recession employment levels. Government data show that regional employment is off more than 1.2 percent,” said Goss.
Bankers pointed to federal policy’s negative impact on job creation. Michael Flahaven, president of Wenona State Bank in Wenona, Ill., said, “The Healthcare Reform Act will likely affect employment in this area in the months ahead. The Dodd-Frank regulations will adversely affect community banks.”
Confidence: The confidence index, which reflects expectations for the economy six months out, dipped to 54.5 from 56.3 in April. “Over the past three months, we asked bankers how the federal spending sequestration was affecting their area economy,” said Goss. “Each month, approximately three-fourths of the bank CEOs reported no impact from sequestration. Only 1.5 percent reported significant impacts with the remaining 20.6 percent indicating only modest impacts.”
Home and retail sales: For a fourth straight month the homes-sales index took a large, positive jump. The May home-sales index advanced to a record 73.9 from April’s 70.8. The May retail-sales index rose to 52.3 from April’s 51.4. “Despite the growth in home sales, bankers reported a modest 4 percent growth in housing prices for Rural Mainstreet over the past year. However, one in 10 bankers indicated that housing prices in their area had expanded by more than 10 percent over the past year,” said Goss.
Each month, community bank presidents and CEOs in non-urban, agriculturally and energy-dependent portions of a 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 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. Goss and Bill McQuillan, president of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.
Colorado: For an eighth straight month, Colorado’s Rural Mainstreet Index remained above 50.0. The May RMI declined to a still healthy 59.2 from April’s 73.1. The farmland and ranchland price index sank to a strong 80.8 from April’s 83.0. Colorado’s hiring index for May expanded to 72.5 from April’s 68.8.
Illinois: While the RMI for Illinois declined in May it remained above growth neutral for the eighth consecutive month. The index declined to 55.9 from April’s 56.7. Farmland prices sank to 52.1 from April’s much stronger 63.0. The state’s new-hiring index decreased to 53.4 from 55.5 in April.
Iowa: The May RMI for Iowa dipped to 58.1 from April’s 62.3. The farmland-price index sank to 60.7 from 70.0 in April. Iowa’s new-hiring index for May weakened slightly to 59.1 from 60.2 in March.
Kansas: The Kansas RMI for May decreased slightly to 61.5 from 61.8 in April. The farmland-price index plummeted to 53.6 from April’s much stronger 65.5. The state’s new-hiring index declined to 54.4 from 56.6 in April. However, bankers are concerned about recent strong growth. For example, Dale Bradley, CEO of The Citizens State Bank in Miltonvale, said, “The economy is still not stable and the ups and downs will affect farmers as well.”
Minnesota: The May RMI for Minnesota advanced to 67.2 from 66.7 in April. Minnesota’s farmland-price index sank to 65.7 from April’s 67.1. The new-hiring index advanced to 62.5 from 61.5 in April.
Missouri: The May RMI for Missouri climbed to 77.0 from April’s 71.7. The farmland-price index for May expanded to 72.1 from 70.8 in April. Missouri’s new-hiring rose to 66.7 from April’s 60.7.
Nebraska: After moving below growth neutral for January, Nebraska’s Rural Mainstreet index has now moved above growth neutral for four straight months. The May RMI expanded slightly to 57.7 from 57.3 in April. The farmland-price index for May sank to 53.9 from April’s 65.4.
North Dakota: The North Dakota RMI for May advanced to a regional high of 83.7 from 78.8 in April. The farmland-price index climbed to 85.3 from April’s 75.6. North Dakota’s new-hiring index increased to 83.6 from 61.2 in April.
South Dakota: The May RMI for South Dakota increased to 60.3 from 57.2 in April. The farmland price index grew slumped to 56.6 from April’s 67.4. South Dakota's new-hiring index for May expanded to 56.3 from 55.4 in April.
Wyoming: The May RMI for Wyoming dipped to 54.4 from 55.1 in April. The May farmland and ranchland price index decreased to 46.2 from April’s 58.0. Wyoming’s new-hiring index sank to 49.4 from 53.2 in April.