Almost a third of bankers surveyed report dramatic cuts in infrastructure spending in their area over the past three years.
After moving below growth neutral 50.0 in August to hit 49.3, the Rural Mainstreet Index (RMI) rose to 52.2 for September, indicating that the rural, agriculturally dependent areas of a 10-state region are growing but at a very slow rate, according to this month’s survey of bank CEOs.
“While our survey results over the past several months do not indicate recessionary economic conditions, they clearly show that Rural Mainstreet economic growth is slowing,” says Ernie Goss, Creighton University economist.
Here are the results of the September survey:
Farming: The farmland price index advanced to 66.9 from 61.9 in August, the 20th straight month the index has been above growth neutral and the third straight month the gauge has risen. Consistent with the upturn in farmland price growth, the farm equipment sales index expanded to 65.4 from 56.9 in August.
“Although both farming gauges are down from the beginning of the year, they are up significantly from September 2010, reflecting very strong farm income growth,” says Goss, the Jack A. MacAllister Chair in Regional Economics.
This month, bankers were asked several questions related to infrastructure spending. Almost one-third, or 32%, indicated that current infrastructure spending in their area has declined dramatically over the past three years. On the other hand, 63% indicated no cutback in infrastructure spending. In terms of support for President Obama’s infrastructure spending as a job-growing initiative, 43% indicated they didn’t support the announced program while 32% said they did. The remaining 25% were unsure.
Kathy Thuman, president of Farmers State Bank in Maywood, NE, says she sees “little long-term job creation coming from the recently released jobs bill.” John Nelsen, president of First Tier Bank in Holdrege, NE, echoes many bankers concerns saying, “I don’t support any new spending. As bankers, have we ever seen someone borrow their way out of debt?”
Regarding support for additional spending on specific items of infrastructure, 69% support more spending on highways, bridges and roads, 15% support added spending on school buildings and equipment, and 10% support more spending on infrastructure to protect against flooding and other weather-related factors. No other program gained more than single-digit support.
According to Bill Hess, president of Iowa Savings Bank in Carroll, IA, “Our problems today stem from a do-nothing Congress, and it will continue that way until we elect qualified people with business sense to set the nation on a proper course.”
Dale Bradley, CEO of the Citizens State Bank in Miltonvale, KS., argues that spending more than the government is taking in “puts the economy on the wrong track.”
Meanwhile, John Schmaderer, president of Tri-County Bank in Stuart, NE, concedes that infrastructure spending is critical to rural development but, “budget cutting and infrastructure development can be inconsistent.”
Banking: The loan volume index for September expanded to 62.5 from 62.1 in August. The checking deposit index increased to 60.3 from 55.4 in August, while the index for certificates of deposit and other savings instruments rose to a weak 41.2 from 40.2 last month.
Jobs: September’s job index climbed to 54.7 from 49.3 in August. “Job growth for Rural Mainstreet communities is between three and four times that of metropolitan areas of the region. Even with the recent strength, Rural Mainstreet communities have lost, on average, 2.7% of their pre-recession levels of employment while urban areas of the region have lost almost 4.3% of their pre-recession level of jobs,” Goss says.
Confidence: The economic confidence index, which reflects expectations for the economy six months out, rose to 50.0 from a weak 44.0 in August. “While the index was up for the month, bankers remain less than optimistic about future economic conditions, compared to last year at this time,” Goss says.
Home and retail sales: For a second straight month, the Rural Mainstreet home sales index moved below growth neutral to 48.5 from 49.3 in August. The retail sales index for September fell to 47.1 from 47.3 in August. “Much like their city counterparts, Rural Mainstreet’s retailers and real estate firms are experiencing weak economic conditions,” Goss says.
Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of the 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.
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.
Colorado: For the ninth straight month, Colorado’s Rural Mainstreet Index (RMI) remained above growth neutral. The index for September rose to 53.2 from 50.7 in August. The farmland and ranchland price index improved to 67.1 from 62.0 in August. Colorado’s farm equipment sales index for September was a strong 65.7. Net change in jobs for Rural Mainstreet Colorado since the recession, -4.0%.
Illinois: The RMI for Illinois remained above growth neutral for the 17th straight month. The September index advanced to 53.1 from 51.9 in August. Farmland prices remained significantly above growth neutral with a reading of 67.4, up from August’s 62.2. The state’s new hiring index was 51.9, up from 50.6 in July. Net change in jobs for Rural Mainstreet Illinois since the recession, -3.4%.
Iowa: The RMI for Iowa rebounded to 53.9 from 50.8 in August. The farmland price index advanced to a strong 67.2 from 58.1 in August. Iowa’s new hiring index for September was a solid 55.8, and up from August’s 50.7. Net change in jobs for Rural Mainstreet Iowa since the recession, -4.3%.
Kansas: After declining below growth neutral for August, the RMI for the state increased to 52.2 from August’s 48.8. The farmland price index expanded to 66.9 from 61.9 in August. The state’s new hiring index was a stronger 54.6 from 48.8 in August. Net change in jobs for Rural Mainstreet Kansas since the recession, -1.9%.
Minnesota: The September RMI for Minnesota expanded to 52.6 from 50.6 in August. Minnesota’s farmland price index climbed to 67.0 from 62.0 in August. The state’s new hiring index rose to 54.9 from 50.6 in August. Net change in jobs for Rural Mainstreet Minnesota since the recession, -2.2%.
Missouri: The RMI for Missouri grew to 52.0 from August’s 49.1. The farmland price index for Missouri dipped slightly to 61.0 from 61.8 in August. The state’s new hiring index advanced to 54.5 from August’s regional low 48.5. Net change in jobs for Rural Mainstreet Missouri since the recession, -8.2%.
Nebraska: The August RMI for Nebraska expanded to a regional high for September of 56.8 from 52.1 in August. The farmland price index expanded to 67.0 from 62.2 in August. The state’s new hiring index stood at 55.1, up from 52.0 in August. Net change in jobs for Rural Mainstreet Nebraska since the recession, -1.6%.
North Dakota: The North Dakota RMI once again declined but to a solid 55.1 from August’s regional high of 58.1. The farmland price index increased to 67.4 from 62.8 in August. The state’s new hiring index was a solid 56.6 but down from August’s regional high of 58.1. Net change in jobs for Rural Mainstreet North Dakota since the recession, +22.5%.
South Dakota: After moving below growth neutral for August, South Dakota’s RMI once again moved into the growth range with a September reading of 52.4, up from 49.4 in August. The farmland price index dipped to 60.1 from 61.9 in August. South Dakota's new hiring index for September was up significantly to 55.1 from August’s much weaker 49.4. Net change in jobs for Rural Mainstreet South Dakota since the recession, -0.8%.
Wyoming: The Wyoming RMI for September increased to 52.9 from 51.2 in August. The September farmland and ranchland price index improved to 67.0 from 62.1 in August. The state’s new hiring index expanded to 55.2 from August’s 51.2. Net change in jobs for Rural Mainstreet Wyoming since the recession, no change.