June Survey Results at a Glance:
* The Rural Mainstreet Index improved to growth neutral, highest since January of this year.
* Farmland prices declined for the 19th straight month, but with wide variations across the region.
* Almost one in five bankers, the same as in May, reported negative fallout from the avian flu outbreak.
* More than one-third of bankers think the Federal Reserve should wait until 2016 to raise interest rates.
* Home sales soared for the month.
For Immediate Release: June 18, 2015
OMAHA, Neb. – The Creighton University Rural Mainstreet Index for June rose slightly from May’s 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: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, climbed to growth neutral 50.0 from May’s 49.0.
“This is the third straight month the index has risen and that indicates economic conditions are improving in the region, though they remain weak by historical standards. The strong dollar is weighing on agricultural commodity prices and farm income for the 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 June declined to its lowest level since November of last year. The index declined to 31.1 from May’s 39.7. “This is the 19th straight month the index has moved 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.
The June farm equipment-sales index matched May’s record low 12.5, which was down from April’s 15.6. The index has been below growth neutral for 23 straight months. “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 June loan-volume index declined to 79.9 from 79.6 in May. The checking-deposit index rose to 48.0 from May’s 43.8, while the index for certificates of deposit and other savings instruments fell to 38.6 from May’s 39.7.
This month bank CEOs were asked when should the Federal Reserve begin raising short term interest rates and when will the Fed begin boosting short term interest rates. Approximately 12.8 percent of bankers said the Fed should immediately begin raising rates. On the other hand, more than 34 percent of bankers recommend that the Fed wait until 2016 to push rates higher.
However in terms of expected rate increases by the Fed, almost one-third anticipate a rate hike by the Fed’s September 2015 meeting. Approximately 40.4 percent expect an interest rate increase in the fourth quarter of 2015. Approximately 27.7 percent expect the Fed to delay a rate increase until 2016.
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 June hiring index was unchanged from May’s 61.5. “Rural Mainstreet businesses continue to hire additional workers. While the rate of new hiring is healthier in urban areas of each state, Rural Mainstreet communities are growing jobs at a solid annual pace of approximately 1 percent,” said Goss.
Confidence: The confidence index, which reflects expectations for the economy six months out, expanded to a weak 45.9 from 41.5 in May. “The avian flu combined with low agricultural commodity prices have had negative impacts on bankers’ economic outlook,” said Goss.
“For the last two months, we have asked bankers about the fallout from the avian flu outbreak. Little changed between May and June with almost one in five of the bankers, or 18.8 percent, reporting negative impacts from the outbreak,” said Goss.
But according to Pete Haddeland, CEO of the First National Bank in Mahnomen, Minn. “The Bird Flu has been tough on Minnesota.”
Home and retail sales: The June home-sales index jumped to 68.1 from May’s 66.0. The June retail-sales index increased to a weak 50.0 from 49.0 in May. “We have yet to measure any significant upturn in retail sales stemming from the downturn in fuel prices,” said Goss.