Survey suggests rural bankers’ optimism rising as Midwest, Plains economy slowly recovers

Survey: Rural bankers’ economic optimism rising

OMAHA, Neb. — A new survey of rural bankers in 11 Midwest and Plains states shows that the region’s economy remains weak but not enough to dampen bankers’ optimism for an economic rally.

The overall index for the Rural Mainstreet economic report released late Thursday inched up in January, to 41 from 40.9 in December. That’s the fifth straight month the index has increased, but organizers say the figure indicates significant economic weakness.

The index ranges between 0 and 100. A score below 50 suggests the economy will contract in the next few months; above 50 indicates the economy will expand.

The index has remained below 50 for 23 consecutive months, said survey organizers Ernie Goss, a Creighton University economist, and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb.

“The uncertainty surrounding legislative changes coming from Washington, combined with economic weakness among mainstreet businesses linked to the farm sector, appear to be weighing on the rural, agriculturally-dependent economy,” Goss said.

But bankers remained upbeat about future economic prospects. The monthly confidence index, which tracks bankers’ economic outlook six months out, climbed to 59.7 from December’s 53.7 and November’s 50.1.

Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming are surveyed.

Bankers were asked in the January survey how much farmland prices have changed over the past six months, with 41 percent reporting no change in prices during that period. About 31 percent reported that farmland prices declined in the last half of 2009, while just more than one in 10 said farmland prices had increased by more than 5 percent.

The survey showed some signs of life in new hiring, with the new-hiring index rising from 33.4 in December to 40.1 — the highest since July 2008. But Goss noted the index has remained below 50 for 25 consecutive months.

“Over the past year, the Rural Mainstreet economy has lost 150,000 jobs, or 3.1 percent of its employment,” Goss said. “I expect the pace of losses to moderate significantly in the months ahead.”

Despite calls from the U.S. Treasury Department for increased lending, the survey’s loan-volume index slumped to a record low level, to 33.4 from December’s 45.7 and the previous record low of 38.3 in November.

On the Net:

Creighton University economic surveys: www2.creighton.edu/business/economicoutlook