Rain, lower energy costs fuel economy

Friday, June 1, 2012

It looks like a May turnaround in the rural economy. Creighton University's monthly Rural Mainstreet Index (RMI), a survey of bankers in 10 upper Midwestern states that includes Iowa, showed growth in May.

Bankers respond to a survey that is sent, asking questions about local economic activity ranging from employment to farmland prices and real estate sales. Their responses are converted to numeric values. Any reading above 50 is considered to be an indicator of growth. Readings below 50 are seen as a sign of contraction.

April's reading was 57.1. May rebounded to 58.5. Bankers are happy about things are going in the ag economy. Early planting and growing conditions are encouraging and farmers are paying for equipment and land purchases with cash, bringing the loan to deposit ratios at banks to levels not seen since the beginning of the recession.

Farmland prices continue to head higher, according to bankers surveyed. However, for a second straight month, farmland price growth softened with the May index dipping to 64.6 from April's healthy 69.4 and March's robust 78.7. This is the 28th consecutive month the index has been above growth neutral.

This month, bank CEOs were asked about the trend in the financing of farmland over the past year More than one-third, or 34 percent, indicated the percentage of farmland sales financed has declined over the past year; only 11 percent reported that the percentage had increased over the past 12 months.

Consumer confidence in the economy six months from now continues to climb, rising to 63.0 from 60 last month.

Home sales continued to improve, rising to 60.8 from last month's reading of 60.0. Retail sales slipped, but remained above neutral, falling to 52.9 from last month's reading of 53.4.

Lower fuel prices have helped the economy, according to Dr. Ernie Goss, who is the author of the survey, but the strengthening dollar will pressure exports down as our prices become higher to international customers.

We hope the positive economic news continues but realize how dependent our local economy is on agriculture.