May Survey Results at a Glance:
* For a ninth straight month, the Rural Mainstreet Index fell below growth neutral.
* Almost one-third of bank CEOs see slow or negative rural growth as the biggest economic threat to their bank over the next five years.
* Approximately nine of ten bankers see low agriculture commodity prices as the greatest challenge to the rural economy for 2016.
* Farmland prices remained below growth neutral for the 30th straight month.
* From their peak levels in 2011, agricultural commodity prices are down by 17 percent, and grain prices are off by 49 percent.
For Immediate Release: May 19, 2016
OMAHA, Neb. – 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.
According to Pete Haddeland, CEO of the First National Bank in Mahnomen, Minnesota, “Regulatory costs continue to go up. We think this will become a bigger portion of our budget each year.”
Hiring: For the first time in almost five years, the Rural Mainstreet hiring index sank below growth neutral. Rural Mainstreet businesses reduced employment levels for the month with an index of 43.2, down from April’s 50.0. “Rural Mainstreet employment is down by almost 1 percent from this time last year. This contrasts to employment gains for urban areas of the region,” said Goss.
Confidence: The confidence index, which reflects expectations for the economy six months out, increased to 38.4 from 34.8 in April indicating a continuing pessimistic outlook among bankers. “Higher agriculture commodity prices boosted the index slightly higher to May’s sub-par reading,” said Goss.
Home and retail sales: Home sales remain the bright spot of the Rural Mainstreet economy with a May index of 61.6 from 58.9 in April. The May retail-sales index fell to a frail 36.0 from a weak 37.8 last month. “Home sales held up for the month, 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.
Colorado: Colorado’s Rural Mainstreet Index (RMI) rose to 46.4 from 43.6 in April. The farmland and ranchland-price index expanded to 68.0 from April’s 66.3. Colorado’s hiring index for May fell to 57.8 from April’s 64.0. Colorado’s Rural Mainstreet job growth over the last 12 months was 2.8 percent.
Illinois: The May RMI for Illinois climbed to 40.7 from April’s 37.8. The farmland-price index expanded to 23.7 from April’s 22.2. The state’s new-hiring index slumped to 41.7 from last month’s 47.9. Illinois’s Rural Mainstreet job growth over last 12 months was minus 0.1 percent.
Iowa: The May RMI for Iowa slumped to 40.3 from April’s 41.2. Iowa’s farmland-price index for May climbed to 47.3 from 45.6 in April. Iowa’s new-hiring index for May dropped to 50.3 from 56.4 in April. Iowa’s Rural Mainstreet job growth over the last 12 months was 1.6 percent.
Kansas: The Kansas RMI for May expanded to 37.3 from April’s 34.4. The state’s farmland-price index for May increased to 10.7 from 8.9 in April. The new-hiring index for Kansas declined to 37.0 from 43.1 in April. Kansas’ Rural Mainstreet job growth over the last 12 months was minus 1.8 percent.
Minnesota: The May RMI for Minnesota advanced to 40.8 from April’s 38.0. Minnesota’s farmland-price index climbed to 34.6 from 32.9 in April. The new-hiring index for the state declined to 45.7 from last month’s 51.8. Minnesota’s Rural Mainstreet job growth over the last 12 months was 0.0 percent.
Missouri: The May RMI for Missouri increased to 30.7 from 27.8 in April. The farmland-price index expanded to 29.8 from April’s 28.7. Missouri’s new-hiring index declined to 17.5 from 23.6 in April. Missouri’s Rural Mainstreet job growth over the last 12 months was minus 5.1 percent.
Nebraska: The Nebraska RMI for May grew to 43.3 from 40.5 in April. The state’s farmland-price index advanced to 44.5 from April’s 42.8. Nebraska’s new-hiring index fell to 49.3 from 57.3 in April. According to Jeffrey Gerhart Chairman of the Bank of Newman Grove in Newman Grove said, “Regulatory burden, low commodity prices and tight margins for farmers will continue to negatively impact our community.” Nebraska’s Rural Mainstreet job growth over the last 12 months was 1.2 percent.
North Dakota: The North Dakota RMI for May increased to a regional low of 17.5 from April’s 14.9, also a regional low. The farmland-price index increased to 14.8 from 13.4 in April. North Dakota’s new-hiring index sank to 35.1 from April’s 35.6. North Dakota’s Rural Mainstreet job growth over the last 12 months was minus 11.7 percent.
South Dakota: The May RMI for South Dakota advanced to 40.3 from 37.4 in April. The farmland-price index grew to 26.1 from 24.3 in April. South Dakota's new-hiring index expanded to 42.6 from April’s 37.8. South Dakota’s RuralMainstreet job growth over the last 12 months was minus 0.3 percent.
Wyoming: The May RMI for Wyoming increased to 34.3 from April’s 31.4. The May farmland and ranchland-price index rose to 12.3 from 10.5 in April. Wyoming’s new-hiring index fell to 31.7 from April’s 37.8. Wyoming’s Rural Mainstreet job growth over the last 12 months was minus 3.3 percent.
Tables 1 and 2 summarize the survey findings. Next month’s survey results will be released on the third Thursday of the month, June 16.