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Rural Mainstreet Index Highest in Six Months
USAgNet - 12/20/2016

The Creighton University Rural Mainstreet Index remained weak with a reading below growth neutral for the 16th straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The index, which ranges between 0 and 100 rose to 42.9, its highest level since June of this year, and up from November's 36.6.

"Weak farm commodity prices continue to slam Rural Mainstreet economies. Over the past 12 months, livestock commodity prices have tumbled by 19.0 percent and grain commodity prices have slumped by 11.5 percent. The economic fallout from this price weakness continues to push growth into negative territory for seven of the 10 states in the region," said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

States trending higher: Iowa, Nebraska, and South Dakota; States trending lower: Colorado, Kansas, Illinois, Minnesota, Missouri, North Dakota and Wyoming.

Farming and ranching: The farmland and ranchland-price index for December fell to a frail 26.8 from November's 30.8. This is the 37th straight month the index has languished below growth neutral 50.0.

The December farm equipment-sales index increased to 16.3 from 15.4 in November.

"Since July 2013, weakness in farm income and low agricultural commodity prices continue to restrain the sale of agricultural equipment across the region. This is having a significant and negative impact on both farm equipment dealers and agricultural equipment manufacturers across the region," said Goss.

Banking: Borrowing by farmers remains strong as the December loan-volume index jumped to 78.5 from last month's 52.4. The checking-deposit index declined to a still solid 57.1 from 67.1 in November, while the index for certificates of deposit and other savings instruments sank to 38.1 from 46.4 in November.

This month bankers were asked to estimate farm loan default rates. Bankers expect loan defaults to expand by 5.6 percent over the next 12 months. "Expected loan default rates have changed little during 2016," said Goss.

Hiring: The job gauge dipped to 51.2 from November's 52.5. For the region, Rural Mainstreet employment is down by 0.6 percent over the past 12 months. Over the same period of time, urban employment for the region expanded by 1.2 percent.

Confidence: The confidence index, which reflects expectations for the economy six months out, rose to 43.9 from 39.0 in November indicating a continued pessimistic outlook among bankers. "Until agricultural commodity prices begin to trend higher, I expect banker's economic outlook to remain weak," said Goss.

Home and retail sales: Home sales moved lower for the Rural Mainstreet economy for December with a reading of 46.4 from November's healthy 58.8. The December retail-sales index increased to 45.1 from November's 37.8.

Bank CEOs expect lackluster holiday sales growth. On average, Rural Mainstreet bankers expect a 0.4 percent increase from 2015 holiday retail sales levels.

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 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. The survey is supported by a grant from Security State Bank in Ansley, Neb.

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. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.

The December RMI for Minnesota expanded to a weak 41.7 from November's 24.4. Minnesota's farmland-price index dipped to 24.0 from 27.7 in November. The new-hiring index for the state slipped to a still solid 54.7 from last month's 55.7. Minnesota job growth over the last 12 months; Minnesota Rural Mainstreet, -0.1 percent; Urban Minnesota +1.3 percent.

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