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Rural Mainstreet Index Falls to Growth Neutral for August
USAgNet - 08/24/2015

The Creighton University Rural Mainstreet Index fell for August from July'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 Rural Mainstreet Index (RMI), which ranges between 0 and 100, sank to growth neutral 50.0 from 53.4 in July.

"This is the first decline in the overall index since March of this year. Weaker conditions among businesses tied directly to agriculture and energy accounted for the downturn in the reading," 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 increased slightly to 32.7 from July's 31.4. "This is the 21st straight month the index has remained 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 the survey asked bankers to project the expected change in farmland prices over the next year. On average, bankers reported an estimated decline of 5.8 percent over the next year. Last August when the same question was asked, bankers reported an expected 4.8 percent decrease.

"Bank CEOs were also asked to estimate current cash rents for nonpasture cropland. On average, bankers reported $263 per acre, which is up from $258 reported last year at this time. Additionally, bankers reported an increase in the share of farmland financed from 74 percent last August to 77 percent this month," said Goss.

The August farm equipment-sales index sank to a very weak 14.2 from July's 17.9, but was up from June's record low 12.5. "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 August loan-volume index climbed to 73.0 from 72.1 in July. The checking-deposit index rose to 55.0 from July's 53.4, while the index for certificates of deposit and other savings instruments dropped to 34.0 from July's 38.6.

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 August hiring index increased to a strong 63.3 from 60.3 in July. "Rural Mainstreet businesses continue to hire additional workers, while 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, which reflects expectations for the economy six months out, slumped to 42.0 from 46.6 in July. "Declines for agricultural commodity and energy prices pushed bankers' economic outlook lower for the month," said Goss.

Home and retail sales: The August home-sales index declined to a strong 70.4 from July's 73.3. The August retail-sales index decreased to 50.0 from 53.4 in July. "Home sales on Rural Mainstreet have been very healthy over the last several months," 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.

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