Midwest, Plains bankers forecast growth in rural economy

Thursday, April 21, 2011 | 5:47 p.m. CDT

OMAHA, Neb. — A new monthly survey of bankers suggests rural areas of 10 Midwest and Plains states are continuing to benefit economically from the strength of agriculture, according to a report released Thursday.

The overall Rural Mainstreet Index improved to 59.4 in April from March's 56.7. Anytime the index, which ranges from 0 to 100, is over 50, it suggests the economy will expand over the next six months.

"Firms linked to agriculture or energy are experiencing very healthy growth and growth prospects," said Creighton University economist Ernie Goss, who oversees the survey.

Bankers in rural parts of Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are surveyed.

The farmland price index grew to a lofty 77.6 in April from March's 75.

The farm equipment sales index remained at a strong level even as it declined slightly to 74.2 in April from March's 75.9.

About 48 percent of the bank CEOs who responded to the survey said the rural economy would suffer if crop prices drop significantly.

Dan Coup, CEO of First National Bank in Hope, Kan., said a downturn in commodity prices could spell disaster for the region's economy. But Coup said weather will again be the biggest threat to farmers.

The bankers who responded to the survey are slightly less confident about the economy over the next six months. The confidence index declined to 61 in April from March's 65.2.

The job picture is improving in rural areas. The April job index increased to 56.9 from March's 56.2.

"Rural areas are outpacing the urban areas in terms of job growth," Goss said.

But energy prices remain a concern.

"Energy prices have to come down, or we are looking at a sagging economy for the rest of the year and perhaps beyond," said Dale Bradley, CEO of Citizens State Bank in Miltonvale, Kan.

The home sales index improved to 55.2 in April from March's 52.3, signaling the weak housing market may be improving.

The retail sales index slipped to 50.1 in April from March's 53.

The loan volume index jumped to 58.1 in April from March's 47.1 as seasonal loan demand grew. The checking deposit index declined to 65.5 in April from March's 68.7. The index for savings instruments increased to 48.5 in April from 45.5 in March.

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