The rural economy, boosted by high commodity prices and energy exploration, is picking up steam.
After experiencing negative fallout from drought conditions over the last three months, the rural U.S. economy soared higher, according to the October survey of bank CEOs in a 10-state area. In fact, The Rural Mainstreet Index (RMI), which ranges between 0 and 100 with 50.0 representing growth neutral, rose to a solid 56.6 from September’s weak 48.3.
For the first time since June, RMI rose above growth neutral, says Ernie Goss, the Jack A. MacAllister chair in regional economics at Creighton University in Omaha, NE. “Our survey indicates the negative impacts of the drought are being more than offset by the positives of very strong incomes from high agriculture and energy prices,” he says.
Looking ahead, however, rural bankers are uncertain about 2013 and beyond. Bankers were asked whether they expect the U.S. to suffer an economic recession in 2013, and 25% think a recession is likely or very likely next year. Conversely, 30.8% think a 2013 recession is unlikely, or very unlikely.
The November elections are seen as very important for some in terms of clouding the outlook.“Forecasting how things will look in 2013, especially business owner sentiment, will depend greatly on what happens on the first Tuesday of November,” says Casey Regan, CEO of Premier Bank in Farmington, MN.
Meanwhile, Dale Bradley, CEO of The Citizens State Bank in Miltonvale, KS, echoed concerns of many other bankers about the potentially large impact of the record tax increase slated to go into effect on Jan. 1, 2013 and its negative impact on the economy.
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There also are concerns about the U.S. economy. “U.S. economic competitiveness is in decline. Since 2009, the U.S. ranking has dropped from 15th to 19th among the 144 nations evaluated by the Fraser Institute. The primary factor damaging the U.S. ranking is the escalating size of the federal government, with U.S. federal spending as a percent of the nation's gross domestic product (GDP) climbing from 21.8% in 2008 to 24.1% in 2012,” Goss says.