Survey of bankers shows another dip in economy

Thursday, August 19, 2010 | 6:35 p.m. CDT

OMAHA, Neb. — A survey of rural bankers in 10 Midwest and Plains states released Thursday showed a further dip in the economy after signs of a rebound earlier this year.

The overall index for the Rural Mainstreet economic report dropped to 46.0 in August, from 49.3 in July and 52.6 in June. The index ranges between zero and 100. A score below 50 suggests the economy will contract in the next few months; above 50 indicates the economy will grow.

The index had been above 50 from April to June after a 26-month streak below that mark.

"Much like the nation, bank CEOs are tracking significant pullbacks in economic activity," said survey organizers Ernie Goss, a Creighton University economist, and Bill McQuillan, chief executive of CNB Community Bank of Greeley, Neb.

Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming were surveyed for the report.

The monthly confidence index, which tracks bankers' economic outlook six months out, dropped for a third straight month, from 52.4 in July to 46.0 in August.

Bankers were asked in August whether they expected the economy to sink back into recession in 2011. About 43 percent of bankers said they thought a further recession was likely or very likely, while 26 percent said that was unlikely or very unlikely.

"There is too much uncertainty (coming out of Washington). Businesses do not like to take financial risks in uncertain times," said Frank Sullentrop, president of Legacy Bank in Colwich, Kan.

The survey reported growth in the two farm indicators. The farmland-price index was 55.3, up from July's 52.5. The farm equipment-sales index rose from 51.8 in July to 52.7.

All three bank indicators — loan volumes, checking deposits and CDs — were at or above 50 for a sixth straight month.

Bankers reported another steep drop in home sales, with the August index falling to 38.8. Goss said that's the lowest index for home sales this year. The index was 41.7 in July and 56.1 in June.

The new-hiring index rose slightly to 45.9 from July's 45.4, while the retail-sales index dropped in August to 40.2, from 41.7.

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