Mainstreet Economy

Farming and ranching: The region’s farmland price index dropped to 56.3 from April’s 64.6. This was the 32nd straight month that the index has advanced above 50.0.  

Bankers reported that non-pasture farmland prices in their area grew by an average of 4.3% over the past 12 months. The bankers responded negatively about the future by reporting an average expected price growth of 0.0% over the next 12 months. 

Farm equipment sales: As a result of sinking farm financial conditions, the farm equipment-sales index fell to a weak 50.2 from 54.3 in April. The index has risen above growth neutral for 28 of the past 30 months. 

Banking: The May loan volume index expanded to a strong 75.0 from 62.5 in April. The checking-deposit index plummeted to a second consecutive low of 22.0 from April’s 25.0, while the index for certificates of deposit and other savings instruments declined to 70.0 from April’s 74.0.

“Two consecutive record low checking deposit indices point to higher deposit outflows, even for community banks,” said Goss.  

Only 15.4% of bank CEOs anticipate the end of the banking insolvency crisis while the remaining 84.6% expect banks to continue to report insolvency challenges. 

James Brown, CEO of Hardin County Savings in Eldora, Iowa, said, “The liquidity problem will continue for some time, and we will see more regulation because of it. And as a bonus for their (regulators) being late to the table, we will all pay higher FDIC payments for as long as we can see.” 

Jeff Bonnett, CEO of Havana National Bank in Havana, Ill., said, “I hope that the ICBA and state community bank associations can be successful in clarifying my point as ‘community banks’ should NOT pay for this big bank mess with increased FDIC assessments.” 

Hiring: The new hiring index for May climbed to 58.0 from 54.2 in April. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses. Over the past 12 months, the Rural Mainstreet Economy has expanded jobs by 2.5% compared to a lower 1.9% for urban areas of the same 10 states. 

Other quotes from bank CEOs for the month:

• Jeffrey Gerhart, former Chair of the Independent Community Bankers of America said, “Winter snow cover and recent rains in northeast Nebraska are a welcome change from the dry weather of the past couple of years. While flooding could create problems, the farming community appreciates the moisture.” 
• Mike Van Erdewyk, CEO of Breda Savings Bank in Breda, Iowa, said, “Federal Reserve rate changes are being perceived as ‘paper cuts’ and not solving the problem.”

Confidence: Higher borrowing costs, deposit outflows and labor shortages continued to constrain the business confidence index to a weak 38.5 for May, up slightly from 38.0 in April. “Over the past 12 months, the regional confidence index has fallen to levels indicating a negative outlook,” said Goss.

Home and retail sales: The home-sales index climbed to 55.8 from April’s 44.0. “After 11 straight months of below growth neutral readings, the home-sales index bounced above the threshold,” said Goss.

The retail-sales index for May expanded to 56.0 from April’s weak 41.7. “Bankers were pessimistic regarding the economic outlook for retail sales for the second quarter after an anemic quarter one,” said Goss.

The survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. The index provides 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 and launched it in January 2006.