strength of rural economies continues to outshine general economic performance.
For a second straight month, the Rural Mainstreet Index (RMI) increased. November's reading from a monthly survey of bank CEOs in ag-dependent areas in a 10-state region rocketed to its highest level since June 2007. Overall, the RMI, which ranges between 0 and 100, advanced to 58.4 from 52.9 in October.
After softening for several months, the rural mainstreet economy appears to be once again growing at a very healthy pace. The farm economy is clearly outpacing the nonfarm economy.
The monthly RMI, calculated at Creighton University in Omaha, NE, was created in 2005 to assess the overall economic health of small-town, rural America. RMI is a unique index covering 10 regional states. It focuses on 200 rural communities with an average population of 1,300, and gives the most current real-time analysis of the rural economy.
This month, bankers were asked to identify the biggest threat to the rural mainstreet economy for 2012. Almost half, 49%, indicated that low ag-commodity prices pose the greatest peril for local economies. Another 18% see the bursting of the farmland price bubble as the biggest risk for the ag-dependent economy, while 16% identified changes in federal alternative energy policies as the potentially greatest hazard for the 2012 economy. Here's a look at some specifics:
Farming: The farmland price index (FPI) rose to its highest level since April 2011. The November index climbed to 75.4 from October's robust 66.9, the 22nd straight month the index has been above growth neutral. After losing a bit of its economic steam, farmers and investors are once again driving up the price of farmland at a rapid pace. Likewise, farmers are continuing to purchase farm equipment at a swift pace. The farm equipment sales index expanded to 68.4 from October's 63.1.
Banking: November's loan volume index sank to 44.2 from 57.3 in October. The checking deposit index soared to 81.7 from October's 71.7, while the index for certificates of deposit and other savings instruments dipped to a weak 41.7 from 44.9 last month.
Bank CEOs also were asked what factors were limiting their lending. With a strong farm economy, 40% said the lack of demand from potential borrowers was the number-one factor inhibiting greater lending. Another 38% said they were lending as usual, while 16% pointed to regulatory concerns limiting their lending ability. One banker reported that, due to an early harvest, farmers were paying down their loans early.
Hiring: November's hiring index dipped to 53.4 from 56.4 in October. Year-over-year job growth for rural mainstreet communities is almost twice that of metropolitan areas of the region. Even with the recent strength, employment for rural mainstreet communities is down approximately 2.8% from pre-recession levels.
Confidence: The economic confidence index, which reflects expectations for the economy six months out, climbed to 57.5 from October's growth neutral 50.0.
Home and retail sales: For a fourth straight month, the rural mainstreet home sales index dropped below growth neutral to 46.7 from October's 49.3. The retail sales index for November advanced to 53.3 from October's anemic 49.3. On rural mainstreet, bankers say retail sales are looking much better as a result of very healthy farm income.
Outlook by state
Each month, community bank presidents and CEOs in non-urban, ag- 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, ag- and energy-dependent portions of the nation.
Colorado: For the 11th straight month, Colorado's RMI remained above growth neutral. The November index rose to 70.4 from 54.3 in October. The farmland and ranchland price index climbed to 81.4 from October's 67.1. Colorado's hiring index for November was a strong 63.8. Colorado's rural mainstreet employment was down 7.7% since the recession began in December 2007.
Illinois: Illinois remained above growth neutral for the 19th straight month. The November index advanced to 56.3 from October's 53.7. Farmland prices remained significantly above growth neutral with a reading of 77.5 from 67.0 in October. The state's new hiring index (NHI) advanced to 56.9 from September's 51.9. Illinois' rural mainstreet employment was down 2.9% since the recession began in December 2007.
Iowa: Iowa RMI slipped to 51.7 from 54.6 in October. FPI increased slightly to 69.3 from 69.2 in October. Iowa's new hiring index for November declined to 52.5 from October's healthy 57.5. Iowa's rural mainstreet employment was up 0.8% since the recession began in December 2007.
Kansas: After increasing for two months, Kansas RMI fell to 49.1 from October's 52.9. FPI at 64.5 was unchanged from October. The state's NHI dropped to 50.1 from 56.4. Kansas' rural mainstreet employment was down 4.6% since the recession began in December 2007.
Minnesota: Minnesota dipped to 52.8 from October's 53.4. Minnesota's FPI climbed to 71.2 from 68.2 in October, while NHI declined to 53.5 from October's 56.7. Minnesota's rural mainstreet employment was down 0.6% since the recession began in December 2007.
Missouri: The RMI for Missouri slumped to 35.8 from October's 52.6. FPI declined to 41.1 from October's 66.8, while NHI dropped to 38.4 from 56.2 in October. Missouri's rural mainstreet employment was down 10.8% since the recession began in December 2007.
Nebraska: The November RMI for Nebraska expanded to 55.7 from 53.5 in October. FPI rocketed to 76.3 from 65.3 in October, while NHI slipped to a still healthy 56.0 from 56.8 in October. Nebraska's rural mainstreet employment was down 0.6% since the recession began in December 2007.
North Dakota: The North Dakota RMI climbed to a regional high of 88.8 from October's 55.8, also a regional high. The farmland price index increased to 93.1 from 71.2 in October. NHI soared to 85.5 from 58.3 in October. North Dakota's rural mainstreet employment was up 23.4% since recession began in December 2007.
South Dakota: November RMI slipped to 51.5 from October's 53.3. The FPI rose to 68.8 from 67.0 in October, while NHI declined to 52.3 from October's 56.6. South Dakota's rural mainstreet employment was up 1% since the recession began in December 2007.
Wyoming: Wyoming's RMI rose to 62.1 from 53.9 in October. The November farmland and ranchland price index soared to 87.7 from 66.7 in October, while NHI expanded to 61.7 from October's 57.1.Wyoming rural mainstreet employment was up 3.9% since the recession began in December 2007.