Is The Rural Economy In A Slump?

An August survey of bank CEOs in 11 Midwestern and Plains states found the rural economy faltering with a significant pullback in hiring, according to the Associated Press. The Rural Mainstreet Index, which ranges between 0 and 100, plunged to a record low of 38.9, down from July’s 41.4. In August 2007, the index was 57.4.

The decline is indicative of the slipping economic fortunes for rural businesses, even as farm income remains strong. The agriculture equipment sales index has declined every month in 2008, with the August reading of 56.8, down from July’s 62.3.

"It is clear that, even as farm income remains strong, rapid increases in input costs are slowing the growth in farm equipment sales," said Creighton University economist Ernie Goss.

Goss and Bill McQuillan, CEO of City National Bank in Greeley, NE, created the monthly economic survey of rural bank CEOs in 11 states: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming. The average community population covered by the survey is about 1,300.

Despite improving crop conditions, good farm income and little fallout from the national housing market downturn, the new-hiring index for August indicated a loss of jobs with a record-low reading of 36.5. This is the eighth consecutive month that the index has been below growth neutral, due in part to escalating energy prices and higher farm input costs.

Farmers, facing higher input costs, pushed August checking deposits to 50.0 from July’s 53.5. The figure in August 2007 was 76.5. Additionally, because of farm cash demands, the index for certificates of deposit and other savings instruments was a weak 46.0, up from 43.0 in July but down from last August’s reading of 56.6.

High farmland prices are the one constant throughout the year. In August farmland price index rose again to a healthy 65.6 from 61.6 in July.