The monthly economic report from Ernie Goss, the economist at Creighton University in Omaha, shows that considitions across the region — except North Dakota — remain subdued. In North Dakota, home sales are up and farmland prices are rising. Following are highlights from the report.
For a third straight month, the overall index for the Rural Mainstreet economy declined, continuing to indicate significant economic weakness, according to the August survey of bank CEOs in an 11-state region.
The Rural Mainstreet Index (RMI), which ranges between 0 and 100, slipped to a weak 32.0 from 32.6 in July and 34.0 in June. However, August’s reading was well up from February’s record low of 16.9. “The RMI has remained below growth neutral for 18 consecutive months. After appearing to bottom out earlier in the year, the index, which gauges overall economic activity, appears to be moving sideways or with little change,” said Creighton University economist Ernie Goss.
The weak national economy has affected the farm sector significantly. With net farm income under pressure, both land prices and sales of farm equipment have weakened over the past several months. This month, bankers were asked about their expectations for 2009 crop yields. More than three in five bankers, or 61 percent, expect crop yields to be significantly up from last year. Only 8 percent of the bankers forecast a decline in crop yields from 2008 levels. Despite this increase in yields, weak farm commodity prices will mean a downturn in 2009 farm income from 2008. Said Bradley Robson, CEO of First State Bank in Belmond, Iowa, “We have missed the bad weather to date, the hail and wind. Crops look excellent and should be 20 percent above last year’s yields. But, with crop prices down, look for 2009 farm income to be off 2008 levels significantly.”
Despite a lot of positive economic news over the past several month, the confidence index, which tracks expectations for the Rural Mainstreet economy six months out, advanced to a still weak 46.0 from July’s 44.6. Bankers have become a bit more pessimistic regarding the rural economy over the past several months.
Hiring in rural areas remains very frail for the Rural Mainstreet Economy. The new-hiring index for August was unchanged from July’s 25.0. This is the 20th consecutive month that the index has been below growth neutral, due in part to the national and global recessions and weakening farm and energy commodity prices. “Over the past 12 months, rural areas of the region have lost almost 5 percent of their jobs,” said Goss.
Despite the federal tax credit for first time home buyers, the Rural Mainstreet home-sales index declined for a third straight month. The August reading dipped to 39.2 from 40.0 in July. This month we asked bank CEOs to compare home mortgage volumes for August of this year to the same period in 2008. Almost 60 percent reported either no change or a decrease in home mortgage volumes. Kurt Henstorf, president of the First National Bank in Shenandoah, Iowa, said, “Home sales seem to be improving, but our commercial sector remains steady in the doldrums.”
Rural Mainstreet reported slippage in banking numbers for the month. The loan-volume index stood at a cool 45.3, up slightly from July’s 43.1. For August, checking deposit growth softened a bit to 52.0 from July’s much stronger 58.5. The index for certificates of deposit and other savings instruments dipped to 49.4 from 53.8 in July.
Below are reports for each state:
Colorado: Colorado’s Rural Mainstreet Index (RMI) rose to 24.2 from July’s regional low 18.6. The August ranch- and farmland-price index advanced to 35.9 from July’s 27.4. The state’s August home-sales index grew to 31.4 from July’s 26.0.
Illinois: The Illinois RMI once again moved below growth neutral. The RMI for August declined to 28.3 from 30.5 in July. Farmland prices continue to show weakness with an August index of 33.2, down from July’s 39.4. The August home-sales index remained unchanged from July at 38.0.
Iowa: Iowa’s RMI once again slipped below growth neutral according to the monthly survey of bank CEOs. The RMI for August slipped to 27.8 from July’s 30.6. The farmland-price index was also below growth neutral with an August reading of 39.5, almost identical to July’s reading of 39.4. August’s home-sales index sank to 35.0 from 38.0 in July. However, Larry Winum, president of Glenwood State Bank in Glenwood, sees some positive changes in the economic pullback and consumer caution. “Savings are up considerably, and people have become more prudent in their spending habits. In my view, this is a positive thing.”
Kansas: The Kansas RMI, like much of the region, was below growth neutral. The August RMI slumped to a regional low of 15.7, from July’s 25.1 and June’s 26.6. The farmland-price index dipped to 27.4 from July’s 34.0. The August home-sales index stood at a regional low 22.9, down from 32.6 in July. Even so, farm yields look very good. According to Dale Bradley, CEO of Citizens State Bank in Miltonvale, “Crops are in excellent condition in our region and received good rains this past weekend. Over all the economy is pretty stable in the agriculture area.”
Minnesota: Minnesota’s RMI slumped to 19.1 from July’s 22.2. The state’s farmland-price index declined to 30.8 from 31.1 in July. The August home-sales index stood at 26.3, which was down from 29.7 in July. Tourism spending for rural areas of Minnesota continues to be challenged according to bankers. Mark Hewitt, president of Northwoods Bank in Park Rapids, reported, “We are in a resort-tourist area and resorts are reporting good results for the first few months of summer, but with many more cancellations than in the past and more last minute bookings. Vacationers are spending less money when they do come.”
Missouri: Missouri’s RMI expanded to 34.0 from July’s 28.9 and June’s 30.4. The state’s August farmland-price index grew to 45.7 from July’s 37.8. The home-sales index stood at 41.2, which was up from 36.6 in July.
Montana: Montana’s RMI declined to a weak 29.8 from July’s 33.5. The state’s farm and ranchland index was also a frail 32.1 while the state’s home-sales index was 35.4. Ken Walsh, CEO of Ruby Valley Bank in Twin Bridges, said, “Moisture conditions have improved over the past year. While this has been much welcomed, it has caused problems with haying. Early calf prices show a 10 to 15 percent decline from a year ago, and the prospects for improvement are very limited.”
Nebraska: As in past months, Nebraska’s RMI remained below growth neutral. The August RMI inched up to 35.9 from July’s 35.6. The Nebraska farmland-price index for August expanded to 47.6 from July’s 44.4. The August home-sales index rose slightly to 43.1 from July’s 43.0. Bankers across the state reported good crop conditions. Jeffrey Gerhart, CEO of the Bank of Newman Grove in Newman Grove reported, “We have the potential for a very good corn and bean crop in our area. Timely rains have benefited our area in southwestern Madison County.” Likewise John Schmaderer, president of Tri-County Bank in Stuart reported, “Row crop conditions in North Central Nebraska are good and hay production was strong as well.”
North Dakota: For a third straight month, North Dakota’s RMI was the highest in the region. The August RMI climbed to 66.5 from July’s 57.6. The state’s August farmland-price index advanced to 78.2 from 66.4 in July and 70.9 in June. The August homes-sales index was a very strong 73.7 which was up from 65.0 in July and 70.8 in June. As in other states, farm yields look good for this time of the year. “Small grain crops excellent, row crops look good but cool weather all summer has slowed development and created maturity concerns, especially for corn,” said Scott Tweksbury, CEO of Heartland State Bank in Edgeley.
South Dakota: South Dakota’s RMI remained below growth neutral with an August reading of 44.1 from July’s 40.5. The state’s farmland-price index expanded above growth neutral to 55.8 from July’s 49.3. August’s home-sales index was 51.3 which was up from July’s 47.9.
Wyoming: Once again, Wyoming and North Dakota were the only states with RMIs above growth neutral. Wyoming’s RMI dipped slightly to 51.3 from July’s 51.8. The August ranch- and farmland-price index was also a very healthy 63.0, up from July’s 60.6. The August home-sales index dipped slightly to 58.5 from July’s 59.2. However some of the state’s bankers were less optimistic. Jim Durfee, CEO of Sundance State Bank in Sundance, for example, said, “It feels like Wyoming’s economic decline is either behind the rest of the country or we are entering the recession more slowly.”