For some time now, indicators of the general health of the overall U.S. economy have consistently thrown up caution flags – for good reason. Jobless rates remain high and the threat of the eventual downside of sequestration has put a pall on optimism.

Perhaps some of those Wall Street economists need to stroll down the main streets of America’s rural communities. They might come away with a slightly different perception.

While the general economy sputters along, the rural economy is, for the most part, doing just fine. That message has been a consistent theme in the Creighton University monthly Rural Mainstreet Index (RMI) recently.

In fact, growth strengthened for the rural mainstreet economy over the past month, according to the May survey of bank CEOs in a 10-state area. The RMI, which ranges between 0 and 100 with 50.0 representing growth neutral, climbed to 58.8. That’s its highest level since December 2012, and up from April’s healthy 58.3.

However, with all eyes on planting progress for the year, some sectors of the rural economy could see some changes ahead. Bankers were asked their thoughts on the most significant risks to the rural economy, and almost 60% say low commodity prices are the greatest threat to the farm-based economy for 2013. Another 16.7% believe drought is the number-one threat, while 15.2 % cite the possible bursting of the farmland price bubble

On a positive note, Charles Helscher, president of Farmers Savings Bank in Keota, IA, reports, “The drought appears to be over in southeast Iowa, at least temporarily.” However, he indicated that excessive rain has delayed planting and some bottom ground may not be planted due to flooding.

Farming: The farmland price index (FPI) dipped to a still strong 62.1 from 66.9 in April. FPI has been above growth neutral for more than three years, but has now declined for the fifth time in the past six months. The farm-equipment-sales index declined to 52.4 from 57.3 in April.

“Since the beginning of the year, the U.S. dollar has climbed in value by 5%,” says Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University. “This has been a factor pushing farm commodity prices downward. For example, corn prices have slumped by almost 10% since December of last year. This trend, which I expect to continue in the months ahead, has taken a bit of the air out of farmland price growth and farm-implement-sales growth.”

Banking: The loan-volume index rose to 72.1 from 66.0 in April. The checking-deposit index declined to 54.5 from April’s 63.0, while the index for certificates of deposit and other savings instruments advanced to a weak 42.6 from last month’s 40.4.

“We are recording more and more reports of negative economic fallout from Dodd-Frank,” Goss says. 

Larry Rogers, president of the First Bank of Utica, Utica, NE, says, “Dodd-Frank and new regulations from the Consumer Financial Protection Board are strangling us. New regulations are going to cause us to quit making residential real estate loans, hurting the people these regulations are supposed to be helping.”

Hiring: May’s new hiring index (NHI) expanded to 59.8 from April’s 57.5. “Despite solid job creation across rural mainstreet beginning in January 2011, rural areas are still not back to pre-recession employment levels. Government data show that regional employment is off more than 1.2%,” Goss says.

Bankers pointed to federal policy’s negative impact on job creation. Michael Flahaven, president of Wenona State Bank in Wenona, IL, says, “The Healthcare Reform Act will likely affect employment in this area in the months ahead. The Dodd-Frank regulations will adversely affect community banks.”

Confidence: The confidence index, which reflects expectations for the economy six months out, dipped to 54.5 from 56.3 in April. “Over the past three months, we asked bankers how the federal spending sequestration was affecting their area economy,” Goss says. “Each month, approximately three-fourths of the bank CEOs reported no impact from sequestration. Only 1.5% reported significant impacts with the remaining 20.6% indicating only modest impacts.”

Home and retail sales: For a fourth straight month, the home-sales index (HSI) took a large, positive jump. May HSI advanced to a record 73.9 from April’s 70.8, while the retail-sales index rose to 52.3 from April’s 51.4.

“Despite the growth in home sales, bankers reported a modest 4% growth in housing prices for rural mainstreet over the past year.  However, one in 10 bankers says housing prices in their area have expanded by more than 10% over the past year,” Goss says.