The Creighton University
Rural Mainstreet Index rose for August, but remained below growth neutral for
the 12th straight month, according to the monthly survey of bank CEOs in rural
areas of a 10-state region dependent on agriculture and/or energy.
Overall: The index, which
ranges between 0 and 100 increased to 41.1 for August from July's weak 39.8.
This month's reading is well off the index for August 2015 when it stood at
50.0.
"Over the past 12
months, farm prices have fallen by 11 percent, cattle prices are off by 22
percent, and grain prices are down by 20 percent. Weak agricultural commodity
prices are pushing farm income lower and sinking the overall Rural Mainstreet
economy," 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 August slumped to 25.6 from 31.3 in
July. This is the 33rd straight month the index has languished below growth
neutral 50.0.
This month, bankers
estimated, on average, farmland prices would fall by another 6.9 percent over
the next 12 months. However, as in previous months, there is a great deal of
variation across the region in the direction and magnitude of farmland prices,
with prices growing in some portions of the region.
Bank CEOs reported an
average annual cash rent per acre of $252 with almost one-fourth of bankers
detailing annual cash rents exceeding $299.
The August farm
equipment-sales index increased to 14.8 from 10.7 in July. "Weakness in
farm income and low agricultural commodity prices continue to restrain the sale
of agriculture equipment across the region," said Goss.
Banking: Borrowing by
farmers remains strong as the August loan-volume index expanded to 78.3 from
last month's 67.4. The checking-deposit index fell to 41.3 from 49.0 in July,
while the index for certificates of deposit and other savings instruments improved
slightly to 44.5 from 43.9 in July.
Approximately 56.5 percent
of bank CEOs expect the Federal Reserve to raise rates before the end of 2016.
Hiring: After moving above
growth neutral for June, the Rural Mainstreet hiring index fell below the
threshold for July and August. According to bankers, Rural Mainstreet
businesses reduced jobs for August with a hiring index of 47.9 which was down
from July's 49.0.
"Rural Mainstreet
employment is down by approximately 1.6 percent from this time last year,"
said Goss. "This contrasts to employment gains for urban areas of the
region of approximately 1.5 percent for the same 12-month period."
Confidence: The confidence
index, which reflects expectations for the economy six months out, plummeted to
27.2 from 32.3 in July indicating an intense pessimistic outlook among bankers.
"Negative economic assessments by the U.S. Department of Agriculture for
2016 farm income combined with recent downturns in agricultural commodity
prices pushed banker's economic outlook even lower," said Goss.
Home and retail sales: Home
sales remain the bright spot of the Rural Mainstreet economy with a robust
August index of 58.9, but down from July's 61.5. The August retail-sales index
increased slightly to a very weak 38.1 from July's 37.8. "Despite low
inventories of homes for sale, Rural Mainstreet home sales continue on a strong
trajectory, but rural retailers, much like their urban counterparts, are
experiencing downturns in sales," said Goss.
Each month, community bank
presidents and CEOs in nonurban 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. The survey is supported by
a grant from Security State Bank in Ansley, Neb.
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. Goss and Bill McQuillan, former chairman of the
Independent Community Banks of America, created the monthly economic survey in
2005.
Missouri: The August RMI for
Missouri plummeted to 22.4 from 37.8 in July. The farmland-price index slipped
to 14.9 from July's 29.6. Missouri's new-hiring index fell to 17.1 from 22.6 in
July. Missouri job growth over the last 12 months; Rural Mainstreet, -11.7
percent; Urban Missouri 2.1 percent.