The Creighton University Rural Mainstreet Index for March slumped from February’s weak reading, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, sank to 43.6, its lowest level since February 2010, and was down from last month’s 46.4.
“The stronger U.S. dollar is undermining the farm and energy sectors by weakening agricultural exports, crop prices, livestock prices and energy prices. Rural Mainstreet businesses dependent on export, agriculture or energy are experiencing pullbacks in economic activity," said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.
Farming and ranching: The farmland and ranchland-price index for March was unchanged from February’s weak 39.4. “Even though crop prices have stabilized, demand for farmland remains weak pulling agricultural land prices down again. This is the 16th straight month the index has moved below growth neutral,” said Goss.
Despite the weakness in farm income, nonfarm investors continue to purchase farmland with the share of outsiders buying farmland rising from 14.4 percent last June, to 17.5 percent this month.
The March farm-equipment sales index plunged to a record low of 15.2 and down from February’s already fragile 19.5. The index has been below growth neutral for 20 straight months. “With farm income expected to decline for a second straight year, farmers have become very cautious regarding the purchase of agricultural equipment,” said Goss.
Banking: The March loan-volume index soared to 64.9 from 46.4 in February. The checking-deposit index dipped to 56.4 from February’s 57.3, while the index for certificates of deposit and other savings instruments advanced to 44.7 from February’s 41.5.
Almost one-third of bankers, or 29.8 percent, say the Federal Reserve should not raise interest rates in 2015. On the other hand, 10.6 percent indicate that interest rates should be increased immediately, while the remaining share of bankers say the Fed should increase interest rates in the second, third or fourth quarter of 2014.
Hiring: Despite weaker crop prices and pullbacks from businesses with close ties to agriculture and energy, Rural Mainstreet businesses continue to add workers to their payrolls. The March hiring index declined to 52.2 from February’s 56.5. “We have yet to measure any significant decline in employment for the energy sector in the region and for businesses linked to agriculture. I expect that to change in the months ahead as lower energy and agriculture prices work their way through the economy,” said Goss.
This month Creighton’s survey group asked bank CEO’s if ethanol plants had altered production due to lower energy prices. Of the bankers with ethanol production in their area, 85.7 percent indicated no change, while 7.1 percent reported increased production and 7.2 percent reported a reduction in ethanol production.
Confidence: The confidence index, which reflects expectations for the economy six months out, expanded to 47.8 from February’s 41.5. “The negative trend in farmland prices, agricultural equipment sales, and oil prices have negatively affected the outlook of bank Rural Mainstreet bank CEOs,” reported Goss.
Home and retail sales: The March home-sales index climbed to 55.5 from February’s 50.9. The March retail-sales index fell to 40.4 from 43.7 in February. “Much like in urban areas, retail sales are contracting rather than expanding,” said Goss.