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Archive for Saturday, October 17, 2009

Bankers survey suggests economy improving in Plains

October 17, 2009

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— For a second straight month, a survey of rural bankers in 11 Midwest and Plains states suggests economic conditions are improving but remain weak.

According to a report issued Thursday by economist Ernie Goss of Creighton University in Omaha, the overall index for the Rural Mainstreet economy rose to 37.5 in October, compared with 36.5 in September and 32.0 in August.

The new figure remained well below the growth-neutral score of 50, but it was much higher than the index’s record low of 16.9 set in February.

The index ranges from 0 to 100. Survey organizers say a score below 50 suggests the economy will contract in the next three to six months, while a score above 50 indicates the economy will expand.

The index has remained below growth neutral for 20 months in a row, said Goss, who developed the index in 2005 with Bill McQuillan, CEO of City National Bank in Greeley, Neb.

“The decline in farm income continues to weigh on the rural, agriculturally dependent economy, with few signals that the economic downturn is coming to an end,” Goss said.

In spring, the U.S. Department of Agriculture predicted that farm income would fall some 20 percent nationally this year.

Goss said the downturn has hurt farmland prices and sales of farm equipment. The farmland price index component of the survey rose to a weak 43.0 from September’s 41.1. It was the 12th month in a row that the farmland price index remained below growth neutral.

The farm equipment-sales index dropped to 36.7 in October, compared with 38.6 last month.

The bankers also reported slight improvement in retail activity. The October index rose to 36.7 from 32.8 in September. And the bankers expected holiday retail sales to drop about 1.5 percent from last year’s weak sales.

Brian Nicklason, president of Woodland Bank in Remer, Minn., said: “I have talked to several local retailers and hospitality businesses, and they are very concerned about business prospects over the upcoming winter months.”

Despite regional worries, some recent good news nationally and record low interest rates buoyed the bankers’ outlook for six months from now. The survey’s confidence index jumped to 58.7 in October from 43.5 in September.

The survey covers Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming.

Almost 200 communities are represented in the survey, with the average community’s population about 1,300.

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