Rural communities across the Midwest heavily dependent on agriculture and energy continue to see economic growth but at a slower rate than previous months.
Low interest rates provide some opportunities in rural economies, but low grain values continue to pull at economic confidence.
The monthly Rural Mainstreet Economy report shows growth continues, but moved 5.3 points lower on the monthly survey to 50.8. The index ranges between 0 and 100, with 50.0 representing growth neutral.
Index ratings were lower across most influential categories. Although bankers saw an improvement in checking deposits and CDs, all other major categories declined with many falling below 50 on the index.
Ernie Goss PhD., economist at Creighton University, explains how lower grain prices have had a major influence on lower equipment sales and farmland prices.
“Over the past year, corn, soybean and wheat prices have declined by 41 percent, 10 percent and 16 percent, respectively. Weaker farm prices are clearly negatively influencing the rural economy.”
Farmland prices on the index fell more than three points on the index to 43.8 in January. The monthly rate is over 27 points lower than a year earlier. Farm equipment sales continue to slide, falling an additional 3.3 points to 41.0 this month. Goss says the decline is explained by an eight percent drop in commodity prices for all farm products over the past year.
Area hiring, which had improved in the last month of 2013, fell 3.1 points in January to 53.8. Retail spending in rural communities also dipped this month, falling below 50 from 54.7 to 46.2 points on the index.
Despite the negative factors, Midwest bankers expect the economy to improve six months out. The confidence index improved by over two points, but remains growth negative at 49.2. The outlook is hampered by Washington’s inability to pass a five-year Farm Bill.
The monthly survey is a collection of responses from 199 bank executives in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.