Uptick reported in rural economy
It’s hardly the turnaround that rural America has been waiting for, but a gauge of economic activity in the nation’s heartland has shown an uptick for the first time in nearly two years.
The Rural Mainstreet Index, produced by Creighton University, reached a mark of 50.1 in May, its highest reading since July 2015 when it was 53.4. The index of economic growth is based on a scale of 0 to 100, with 50 being neutral.
“Stabilizing and slightly improving farm commodity prices helped push the overall index into a weak but above growth-neutral for May,” said Ernie Goss, an economist at Creighton’s Heider College of Business.
The farmland and ranchland price index, a key component of the overall index, was 36.4 in May, still below the neutral mark, but a sharp increase from the 30.7 mark in April.
The farm equipment sales index also showed slight improvement in May, according to the index.
However, Goss warned that falling prices still represent an obstacle to recovery for farm economies. The Department of Agriculture is projecting a decrease of 8.7 percent in U.S. farm income in 2017, which would be the fourth consecutive year of decline.
“This downward trend has weighted on our survey results for almost two years,” he said.
Hiring was up from 57.8 in April to 60.1 in May, with businesses not linked to agriculture adding new hires at a solid pace.
The confidence index, which reflects expectations for the economy six months out, nudged slightly upward from 45.6 in April to 46.6 in May.
Goss said that reflects a continued pessimistic outlook among bankers. “Until agricultural commodity prices begin to trend higher, I expect banker’s economic outlook to remain weak,” he said.
The Rural Mainstreet Index surveys community bank presidents and CEOs in a 10-state area in the nation’s heartland that relies on agriculture and energy.
Steven Johnson is a staff writer for NRECA.