Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.
The Rural Economy Outlook Turns Positive in September
Sep 20, 2011
The Rural Mainstreet Index (RMI) advanced to 52.2 from a 49.3 to move into positive growth for September after falling below growth neutral in August. Farmland values continued to grow as bankers are optimistic about appreciation growth for the next 12 months.
After three months of consecutive declines, the RMI increased to 52.2 and surpassed the neutral mark of 50.0. The index is now at a positive growth and positioned well above the 47.6 it posted 12 months ago.
Although the RMI shows a positive trend, some believe the growth is slowing down. Creighton University economist Ernie Goss said, "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."
The farmland price index increased to 66.9 from 61.9 in August. This marks the 20th straight month the index has been above growth neutral and the third straight month the gauge has risen. Consistent with the farmland values, farm equipment sales index increased to a 65.4 from August's 56.9. "Although both farming gauges are down from the beginning of the year, they are up significantly from September of last year reflecting very strong farm income growth," said Goss.
Bankers were asked several questions regarding infrastructure spending. Regarding support for additional spending on specific infrastructure, 69% were supportive of spending on highways, bridges and roads, 15% were in favor of spending on school buildings and equipment and 10% favored spending on infrastructure to protect against flooding and other weather related factors.
Bankers are hesitant to support more spending. "I do not support any new spending. As bankers, have we ever seen someone borrow their way out of debt?," commented John Nelson, president of First Tier Bank in Holdrege Nebraska. On the other hand John Schmaderer, President of Tri-County Bank in Stuart Nebraska conceded that infrastructure spending is critical to rural development but, "Budget cutting and infrastructure development can be inconsistent."
The loan volume index expanded slightly to 62.5 from 62.1. The check deposit index increased to 60.3 from a 55.4 in August and the certificate of deposit and savings instruments increased to a weak 41.2 from 40.2 last month.
September's job index rose to 54.7 compared to 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 approximately 2.7 percent of their pre-recession levels of employment while urban areas of the region have lost almost 4.3 percent of their pre-recession level of jobs," said Goss.
The economic confidence index rose to a flat 50.0 from 44.0 the month before. “While the index was up for the month, bankers remain less than optimistic about future economic conditions, compared to last year at this time,” said Goss.
This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The 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.
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