Survey: Rural bankers see improvement in Midwest economy

OMAHA, Neb. -- While U.S. economic conditions remain weak, rural bankers in 11 Midwest and Plains states reported improvements for the third month in a row.

The bankers who responded to the monthly Rural Mainstreet survey cited an increase in home sales and healthy banking as factors in the continued upswing, according to the report released late Thursday.

The Rural Mainstreet Index, which ranges between 0 and 100, soared to 36.2 this month, from April's 21.7 and March's 18.7. That's the highest the index has reach since September.

A year ago, the index stood at 42.6.

An index greater than 50 indicates a growing economy over the next three to six months.

"Weaker farm income, significant reductions for rural manufacturers and a weak U.S. economy continue to negatively affect the Rural Mainstreet economy," said Creighton University economics professor Ernie Goss.

Goss and Bill McQuillan, CEO of City National Bank in Greeley, Neb., created the survey, which covers Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming.

The survey's farmland-price index saw a slight dip in May, to 39.2 from April's 41.2. The farm equipment-sales index hit a new record low, slipping to 28.3 from last month's 29.6.

Goss attributed the declines to the global recession, which has hurt the sale of U.S. farm exports. But several bankers said farm conditions have not sunk as low as the 1980s, when there was a record low for farm equipment sales.

Meanwhile, the survey's confidence index, which reflects expectations for the economy six months from now, rose above neutral growth for the first time since September 2007. The May figure was 56.0, from April's 45.6.

"Bankers in our survey are clearly getting optimistic in their economic outlook," Goss said.

When asked whether the closure of GM and Chrysler dealerships would have an impact on their communities, 66.2 percent of bankers said they expected little or no impact. Only 9.2 percent expected significant fallout.

The new-hire index for May rose to 29.3, from April's 15.8 and well above February's record low of 14.7.

The retail-sales index posted a small gain in May, to 34.9 from last month's 20.5. It was the index's highest reading since July.

The home-sales index rose to 48.7 in May, it highest level since June and well above last month's 30.8. However, half of bankers saw little growth in home sales from the federal tax credit offered this year to first-time home buyers.

While banking numbers were seen as generally healthy, the loan-volume index fell to 46.7 from April's 50.8. Checking deposits expanded, although there were slight dips for CDS and other savings account.

Almost 200 communities are represented in the survey. The average community population is about 1,300.