OMAHA, Neb. - An index of rural economic health
in nine Midwestern and Plains states declined for the second
consecutive month, suggesting slower growth ahead.
The index for the Mainstreet economic survey fell to 52.1 in
October from 55.6 in September.
"A reading of 50.0 is growth neutral, thus October's index
indicates positive but tepid growth on rural Mainstreet," said
Creighton University economist Ernie Goss.
Goss and Bill McQuillan, chief executive officer of City
National Bank in Greeley, Neb., created the monthly
survey.
Rural bank presidents and chief executives were surveyed for
the Mainstreet economic index about current economic conditions in
their states and their expectations for six months from now. The
states are Colorado, Illinois, Iowa, Kansas, Missouri, Nebraska,
North Dakota, South Dakota and Wyoming. The average community
population covered in the survey is about 1,300.
October's survey asked the bankers about how much they expect
farmland prices to rise over the next 12 months.
More than 58 percent expected farmland prices to grow by less
than 5 percent, while 5.7 percent said they thought prices will
grow by more than 10 percent.
"It is clear that there is real concern that the surge in
agricultural land prices over the past several years cannot be
sustained," Goss said.
Said Jim Bohart of Harvard State Bank in Harvard,
Neb.: "Land prices and cash rent are way out of line
with what the producer can generate for income."
Almost 60 percent of the CEOs surveyed said they believe the
benefits of corn-based ethanol have been oversold.
Rising farm income is still helping rural businesses, as the
farm equipment sales index rose to 61.3 from 58.2 a month earlier.
It was the second-highest level since the survey began in
2005.
The national economic ills infected the bankers' economic
optimism about their rural economies six months from now: The
October confidence index plunged to 49.3 from 56.7 in
September.
In another sign of ebbing growth, employment gains as
reflected by the new-hiring index dropped for the second straight
month and hit 49.3 - below growth neutral. The figure was 53.2 in
September and 59.8 in August.
"Based on reports from our survey and from government data, I
expect Rural Mainstreet job growth to be about one-third of its
long-term average with many areas actually losing jobs," Goss
said.
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