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Trade Concerns Batter Business Confidence
USAgNet - 04/25/2018

The Creighton University Rural Mainstreet Index slipped in April, but remained above growth neutral for a third straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy. This is the first time since the middle of 2015 that the survey has recorded three straight months of overall indices above growth neutral.

Overall: The overall index dipped slightly to 53.5 from 54.7 in March. The index ranges between 0 and 100 with 50.0 representing growth neutral.

"Surveys over the past several months indicate that the Rural Mainstreet economy is trending upward with improving, and positive economic growth. However, weak farm income continues to weigh on the rural economy," said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Recent trade tariffs, both implemented and proposed, have reverberated throughout agricultural areas of the region. Some have advanced various federal measures to assist agriculture, including eliminating oil refinery wavers to the renewable fuels standard (RFS). Approximately 21.1 percent of bankers supported the elimination of the waivers, 47.3 percent backed granting no more waivers, while 31.6 percent, supported increasing oil refinery waivers.

According to Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, who recently met with DC legislators, said, "The meeting was for regulatory relief (s.2155) that will benefit both the consumer and community banks, and passing a new farm bill that will allow farmers to continue to feed the world. We came away optimistic that Congress will pass legislation on both issues. The growth of our economy depends on it."

Farming and ranching: The farmland and ranchland-price index for April increased to 42.9 from March's 42.7. This is the 53rd straight month the index has fallen below growth neutral 50.0.

The April farm equipment-sales index climbed to a weak 37.8 from March's 37.2. This marks the 56th consecutive month the reading has moved below growth neutral, 50.0.

Banking: Borrowing by farmers expanded for April as the loan-volume index rose to 68.7 from 56.8 in March. The checking-deposit index fell to 56.0 from March's 58.0, while the index for certificates of deposit and other savings instruments sank to 45.3 from 50.0 in March.

Hiring: The employment gauge soared to 64.0 from March's healthy 58.1. The Rural Mainstreet economy is now experiencing positive year-over-year job growth. The Rural Mainstreet economy has added jobs at a 0.4 percent pace over the past 12 months. Job growth in rural areas is now exceeding that of the urban areas of the 10-state region.

Confidence: The confidence index, which reflects expectations for the economy six months out, sank to 50.0 from March's 58.0 indicating waning economic optimism among bankers. "An unresolved North America Free Trade Agreement (NAFTA) and rising trade tensions with China are significant concerns," said Goss.

When asked this month how important export markets are to their local economy, bankers expressed great support for export markets. More than three-fourths, or 76.2 percent, of bank CEOs reported that export markets were very important to their local economies.

In terms of NAFTA, almost one-third, or 31.0 percent, backed abolishing NAFA and starting negotiations on a fresh agreement. Approximately, 40.5 percent supported continuing with the current NAFTA.

Home and retail sales: The home-sales index moved higher for the Rural Mainstreet economy in April advancing to 57.1 from March's 52.3. The April retail-sales index improved to 53.6 from March's weak 48.9.

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.

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.


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