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Rural Mainstreet Economy Remains Weak for May
USAgNet - 05/31/2016

The Creighton University Rural Mainstreet Index for May increased from April's very weak reading, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: While remaining very fragile, the Rural Mainstreet Index (RMI) has increased three of the last four months. The index, which ranges between 0 and 100, rose to 40.9 from April's 38.2.

"This is the ninth straight month the overall index has remained below growth neutral. Even though agriculture and energy commodity prices have increased recently, they remain well below prices 12 months earlier and from their peak levels in 2011. Farm prices are down by 17 percent and grain prices are off by 49 percent," said Ernie Goss, Jack A. MacAllisterChair in Regional Economics at Creighton University's Heider College of Business.

Farming and ranching: The farmland and ranchland-price index for May climbed to 28.4 from April's 26.7. This is the 30th straight month the index has moved below growth neutral.

When asked to identify the biggest threat to the Rural Mainstreet economy for 2016, more than 9 of 10 bank CEOs named low agriculture commodity prices as the greatest challenge to the Rural Mainstreet economy. 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.

The May farm equipment-sales index sank to a dismal 10.7 from 11.1 in April. "Weakness in farm income and low agriculture commodity prices continue to constrain the sale of agriculture equipment across the region. Reductions in farm prices have negatively affected local agricultural equipment dealers and regional manufacturers of farm equipment," said Goss.

Banking: The May loan-volume index jumped to 77.9 from last month's 71.8. The checking-deposit index slipped to 45.5 from April's 47.8, while the index for certificates of deposit and other savings instruments slumped to 40.9 from 44.4 in April.

This month bankers were asked to identify the greatest challenge facing their banking operations over the next five years. Approximately 30 percent named rising regulation, and an equal 30 indicated slow or negative economic growth as the biggest threat or challenges.

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