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Rural Mainstreet Index Signals Economic Slump

posted on March 11, 2010

Hello, I'm Mark Pearson. News on the economic recovery front was mixed this week. The good news of increased sales at the cash register was tempered by concerns about government spending.

Retail sales were up three tenths of one percent -- way above market expectations. After auto sales are removed from the calculation it was clear consumers were still opening their wallets despite the recession.

Numbers released this week showed the trade deficit has fallen to the smallest amount in eight years. Economists expect the gap to widen later this year as more exports are purchased if the dollar weakens as predicted.

Despite the mixed economic news -- and a volatile week of trading -- the market continued its week-over-week increase and finished above 10,600.

No one has been exempt from the two-year economic downturn. Rural America -- often protected from the economic stresses that plague Urban America -- has not been immune to the current economic recession.

Congress has moved to help farm-country on the road-to-recovery by working to reinstate the federal bio-diesel tax credit. Responsible for creating hundreds of jobs and generating millions of dollars in revenue, the bill passed through the House and Senate with only a few differences. The measure is on its way to conference committee for final negotiations.

But Rural America still has an uphill climb ahead. The Rural Mainstreet Index, or RMI -- which tracks factors like farmland prices, retail business activity, and new job hires in town -- has spent the past two years hovering below its theoretical "growth" line.


Rural Mainstreet Index Signals Economic Slump

For the first time since August of last year, the economy on rural main streets declined. The new data comes from the Rural Mainstreet Index, or RMI. Recently released, the RMI shows the rural economy slumped to 36.6 from January's 41.0. A reading of 50.0, on the index's scale of 0 to 100, is considered growth neutral.

The RMI represents a snapshot of rural America covering 11 states from Wyoming to Illinois and Minnesota to Missouri. The survey focuses on approximately 200 rural communities with an average population of 1,300.

Dr. Ernie Goss of Omaha's Creighton University tracks economic trends, particularly in the Midwest. He created the monthly economic survey in 2005.

Dr. Ernie Goss, Creighton University: "We did two surveys of banks in rural areas, and then we do a survey of purchasing managers, supply managers in more urban areas. The rural areas are weaker right now, so there is a significant difference between what's going on in the rural areas and what's going in the urban areas. Both are recovering."

According to the RMI, the rural economy is underperforming urban areas and the softer farm economy continues to weigh on rural mainstreet businesses. Farmers have been taking a conservative approach to their buying and this is reflected in the survey.

Dr. Ernie Goss, Creighton University: "Our bank CEOs are telling us it's still tough out there. Annualized job losses in the rural areas are still quite significant. The rural areas are still taking a hit, and a lot of that has to do with farm income which, of course, 2009 was not a good year relative to 2008. 2010, as long as we see the dollar coming down, it's going to be a good year for agricultural income, which will show up in the rural numbers."


Tags: economy news rural