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Survey Paints Pessimistic View of Rural Economy

For the sixth straight month, the Rural Mainstreet Index of Midwestern bankers paints a less-than-encouraging picture of the rural economy. (ericberthe/morguefile)
For the sixth straight month, the Rural Mainstreet Index of Midwestern bankers paints a less-than-encouraging picture of the rural economy. (ericberthe/morguefile)
February 19, 2016

DES MOINES, Iowa - Local bankers in small towns across Iowa and nine other states are surveyed to make up the "Rural Mainstreet Index," and the latest index shows a distinct lack of optimism about the rural economy.

The index rose from 34.8 in January to 37 points in February, which is still considered below neutral in terms of their outlook for growth. Creighton University economist Ernie Goss, who oversees the survey, said it appears farmers are more overextended at banks than at this time last year, but it isn't a cause for alarm.

"The farmers still remain in reasonably good condition," he said. "This is nothing like a return to the 1980s, where the farmers mortgaged their land up significantly, and we are moving into a territory where the farmer is getting more leverage than before."

Goss said continued low commodity prices primarily are to blame for the negative outlook. The bankers were asked for their current views of the local economy, and predictions for the coming six months. Only 8.7 percent said their local economy is expanding, while more than a third - almost 37 percent - called theirs a recession.

Goss said he believes market conditions will improve in the second half of 2016, with some cautions.

"2016 is going to be somewhat like 2015, a bit challenging for the rural areas," he said. "For example, farmland prices still coming down; we're seeing cash rents, cash land rents, for the region coming down a bit."

He said the rural economy is stabilizing, but it's been at a low point.

"What we need to see going forward is at least international trade improving, also a turnaround in the global economy - and tack on a weaker dollar, that would all push the agricultural economy into positive territory," he said. "But right now, it's not in the immediate horizon."

This is the sixth month in a row with survey results below growth-neutral levels. Higher home sales in rural communities are one bright spot in the report.

The survey is online at creighton.edu.

Jeff Stein, Public News Service - IA