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April Mainstreet Index

Mainstreet Land Prices Expand to Record Level: April Hiring Very Strong

April Survey Results at a Glance:

• High grain prices and ethanol production propel rural economy higher
• Land price index soars to record high
• Hiring remains strong, but labor shortages surface in some areas
• About 88 percent of bankers report little fallout from housing downturn and sub-prime lending problems

The Mainstreet economic index from the April survey of bank chief executive officers (CEOs) in non-urban, agriculturally dependent portions of a nine-state area declined slightly from March’s record level. Despite the decline, the index continues to indicate significant growth with labor shortages in some areas. Agricultural land prices soared to a record level in April.

Each month, community bank presidents and CEOs are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bank-ers from Colorado, Illinois, Iowa, Kansas, Missouri, Nebraska, North Dakota, South Dakota and Wyo-ming are included.

"Bank presidents and CEOs in the region reported record business activity for April as the overall economic index declined slightly to 66.9 from March’s 68.1, but it was up significantly from last April’s reading of 48.0. A reading of 50.0 is growth neutral, thus April’s index indicates brisk growth," said Creighton University economist Ernie Goss. Goss and Bill McQuillan, CEO of City National Bank in Greeley, Neb., created the monthly economic survey.

While the negative fallout from the housing decline and sub-prime loan defaults have slowed growth in the nation, bankers on Mainstreet report little impact from home and mortgage troubles with only 8 percent of the bankers indicating any substantial negative impact. Importantly, the home-sales in-dex for the region advanced above growth neutral for the first time since the survey was started in late 2005 with an April reading of 50.8, up from March’s 42.4.

“Although our housing market is definitely shifting to a buyers’ market, we have not seen as dramatic a downturn in home sales as metropolitan areas appear to be experiencing,” said Larry Winum, president of Glenwood State Bank in Glenwood, Iowa.

Ethanol production and high farm income continue to drive the Mainstreet economy into very healthy territory. The monthly hiring index indicates significant job growth even though it moved down to 65.3, from March’s 66.0. “Bankers, especially those located close to ethanol plants, are increasingly reporting labor shortages. Despite these shortages, job growth in the region is currently over twice the historical average for the nine states,” said Goss.

Patrick Kenner, president of Thayer County Bank in Hebron, Neb., agreed, “We are experiencing a critical surge in the demand for welders and construction workers with area ethanol plant construction.”

Very strong farm income pushed the farmland price index to 80.2, a record level that is up from 73.4 in March.

The farm-equipment-sales index rose in April to a record 64.3 from March’s respectable 54.3. Steven Lane, CEO of Security Savings Bank in Farnhamville, Iowa, said high grain prices have continued to put money into the local economy. “We have seen an increased number of farmers purchasing grain trucks to haul grain to the local ethanol plants.”

Also supporting the growth scenario was April’s retail index which rose to 53.3, the first time it has moved above growth neutral since beginning the survey, and up from March’s 46.8. However, en-ergy costs and drought conditions have undermined growth in some areas of the region. As reported by John Schmaderer, president of Tri-County Bank in Stuart, Neb., “Rising fuel costs and drought conditions will again determine the level of financial success our area experiences.”

However other bankers report reduced weather related difficulties. Bill Anderson, CEO of First State Bank in Hordville, Neb., said, “Farmers in our area are finally able to get to the field. Timely plant-ing is critical to maximum yield potential.”

Bank indicators for April were all positive and indicative of an expanding Mainstreet economy. Loans rose to 66.9 from March’s 53.2, checking deposits increased to 64.4 from March’s 63.8, and cer-tificates of deposit advanced to 67.2 from March’s 66.0.

Colorado: The April Mainstreet index declined slightly from March’s robust reading. The April index was 72.7, down from March’s 73.3, though strong farm and ranch income has pushed Colorado’s Mainstreet economy higher in the past few months. Hiring in rural portions of Colorado was brisk with an April reading of 70.9, down from 71.4 in March. As stated by Mike Bass, president of First National Bank of Hugo, “We are seeing strong cattle prices in our area. Recent moisture has the wheat crop look-ing above average.”

Illinois: Illinois’ April Mainstreet index declined slightly to 61.7 from March’s 61.8. Hiring in rural areas was vigorous with a reading of 60.1 which was up from 59.9 in March. “The downturn in the housing market has not affected rural communities as much because we have not had the large increase in values many urban and suburban areas experienced. What we have seen are farmland prices in our area stabilizing as development in the suburban Chicago area slows,” said Kent Siltman, president of Citizens First Bank in Walnut.

Iowa: April’s Mainstreet index for Iowa advanced to 60.7 from March’s healthy 59.1. New job growth was solid for the month with a hiring index of 59.2 which was up from 57.3 in March. As re-ported by Dale Torpey, president of Federation Bank in Washington, “We need some warm weather to get the soil temperatures up so planting can begin. It looks good for the next week so hopefully the farm-ers can get the crops in.”

Kansas: The Mainstreet index for Kansas dipped slightly to 65.0 from March’s 66.4 and Febru-ary’s much weaker 52.0. The employment or hiring index moved slightly lower to 63.4 from March’s 64.4, but up significantly from February’s 48.9. Joe Kennedy, CEO of First National Bank in Frankfort reported, “A wheat crop that looked great may turn out to be gone because of the hard freeze we had re-cently," However, at this time, farm income for 2007 looks good from the bankers’ perspective.

Missouri: Missouri’s Mainstreet index declined to a still very healthy 68.6 from February’s 73.4. Hiring in rural areas remained strong with an April employment or hiring index of 66.9, down from March’s 71.1. “Missouri’s rural areas are currently growing at twice the pace of the state’s metropolitan areas,” said Goss.

Nebraska: April’s Mainstreet index for Nebraska dipped slightly to 63.3 from 64.0 in March. April’s hiring was brisk for most of Nebraska with a hiring index of 61.7, down slightly from March’s 62.0. Bankers in the state have reported shortages of skilled workers in areas with significant ties to etha-nol production. Kathy Thuman, president of Farmers State Bank in Maywood, said, “Southwest Ne-braska producers are encouraged by the spring moisture and commodity prices, but we are waiting to see the effect of early spring storms on calves and late spring frost on wheat.” However, results for April were not uniformly positive. Bill McQuillan, CEO of City National Bank in Greeley, said, “Mainstreet businesses are not feeling the positive economic impacts that metro areas are experiencing.”

North Dakota: The Mainstreet index for North Dakota weakened slightly to a still robust 65.3 from March’s 65.9, but up from February’s 58.3. New hiring in rural portions of the state was vigorous with an index of 63.6, from 63.8 in March. “Our rural economy is heavily dependent on agriculture and 2007 looks like a good crop year with strong commodity prices and the potential for a better than average crop in our area,” said Nancy Baerwald with Countrybank U.S.A

South Dakota: The Mainstreet index for April declined to 67.0 from March’s 68.7. Hiring growth in rural areas of South Dakota was strong with an April new hiring index of 65.3, down from March’s brisk index of 66.5. According to Todd Douglas, CEO of First National Bank in Fort Pierre, “Recent moisture has helped central and eastern parts of the state. The western area is still dry. Recent announce-ment of two new stores, Cabela’s and Scheels, locating in Rapid City should spark other retail investment in Rapid City.”

Wyoming: The Wyoming Mainstreet index stood at a regional high of 82.5 which is down slightly from March’s of 83.3, but up from February’s 73.4 and January’s 75.0. Hiring in rural portions of Wyoming was robust with an April new hiring index of 80.4, almost the same as March’s 80.6. “At this time, Wyoming’s Mainstreet is outperforming metropolitan and rural areas of the region and nation. An influx of new workers will be key to continued growth,” said Goss. 

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posted 4/19/07

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