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Rural Mainstreet Index drops below growth level

posted on August 26, 2011


Rural Mainstreet Index drops below growth level

Each month Creighton University researchers survey bank executives in 10 predominantly Midwestern states and compile a snapshot of the rural economy.  In its 3rd consecutive monthly decline, Creighton's Rural Main Street Index fell more than 6 points in August to 49.3.  Any reading below 50 indicates a contracting economy.

 Ernie Goss, Creighton University Economist: “The bank CEOs in the month of August [were] fairly pessimistic about the rural Main Street economy.”

 The Index focuses on approximately 200 rural communities with an average population of 1,300 and is directed by Creighton University economist Ernie Goss. 

 Ernie Goss, Creighton University: “The businesses on Main Street, as reported by the bank CEOs are not doing as well. Of course, on the flipside, they report for the farming sector, farms are doing fairly well, although there, we’re not seeing the growth now there that we did earlier in the year, even the growth in the farm sector is slowing down a bit.”   

According to this month's study, 35 percent of bankers surveyed believe the U.S. economy will fall back into recession by the end of 2011.  And while a cheaper dollar is friendly to commodity prices and farm equipment sales, Goss says it's not translating into a boom on Main Street.    

 Ernie Goss: “That’s one of the reasons, significant divergence or gap between in what’s going on with farming, which is international, selling internationally, pushing up and boosting the price, for example, the price of corn, wheat, soybeans, pork and beef and other agricultural commodity prices, but at the same time the businesses on main street that depend on the domestic economy, not doing as well, they are not benefitting from the cheap dollar policies to the great extent. That’s why we’re seeing this gap.”  

 The survey revealed farmland values remained above growth neutral for the19th consecutive month, advancing 2-and-a-half points in August to 61.9.

 According to Goss, a weak economy and significant economic volatility have encouraged nonfarm investors to buy nonfinancial assets including farmland.  In some areas values have risen 10-to-20 percent annually, but -- on average -- values are projected to increase by a more modest 2.6 percent over the next year. 

 Ernie Goss: “While I think some of the air is going to come out of the price land bubble, we’re not going to see all that air come out, right now. We’ll continue to see growth in farmland prices, just not like we’ve seen in the past. What we’re seeing, at least according to bank CEOs is a lot of gentlemen and gentlewomen farmers in Omaha, Des Moines, Minneapolis, Fargo, and so on, buying land, it’s a safe haven buy. It’s what some say is the new gold, you’ve got a lot of cash out there, money out there, and there’s a lot of people, investors, scared, where do they see some safety? Farmland and gold...”  

 

 


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