February Rural Mainstreet Index Turns Negative:
Farm Equipment Sales and Farmland Prices Decline Again
February Survey Results at a Glance:
- The Rural Mainstreet Index fell below growth neutral for February.
- Farmland prices sank for the 15th straight month.
- Approximately 22.2 percent of farmland sales were cash sales, almost unchanged from October 2014.
- February marked the 19th straight month that farm equipment sales declined.
- Banker’s economic outlook sank for the month.
For Immediate Release: Feb. 19, 2015
OMAHA, Neb. – The Creighton University Rural Mainstreet Index for February slumped from January’s tepid reading according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, sank to 46.4 in February, which is down significantly from January’s 50.9.
“Weaker exports and lower energy and grain prices continue to weigh on the rural economy that is dependent on agriculture and energy,” said Ernie Goss, Ph.D., Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
Farming and ranching: The farmland and ranchland-price index for February was unchanged from January’s weak 39.4. “Even though crop prices have stabilized, demand for farmland remains weak pulling agricultural land prices down by an estimated annualized rate of 6 percent to 8 percent. This is the 15th straight month the index has moved below growth neutral,” said Goss.
Even though farm income has weakened, more than one-fifth, or 22.2 percent, of farmland sales are for cash according to bankers in February. This is little changed from 23.3 percent recorded in October of 2014.
The February farm-equipment sales index plummeted to 19.5 from 29.5 in January. The index has been below growth neutral for 19 straight months. “Farmers have become very cautious regarding equipment buying even though their purchases of seeds and other inputs have remained solid,” said Goss.
This month bankers were asked to estimate the 2015 change in farm equipment sales for their geographic area. On average, a 14.4 percent decline in equipment sales is expected by the bank CEOs. Approximately 60 percent of the bankers expect reductions of more than 15 percent.
Banking: The February loan-volume index plunged to 46.4 from January’s 62.1. The checking-deposit index sank to 57.3 from 64.8 in January, while the index for certificates of deposit and other savings instruments fell to a very weak 41.5 from last month’s 42.6.
Hiring: Despite weaker crop prices and pullbacks from businesses with close ties to agriculture and energy, Rural Mainstreet businesses continue to add workers to their payrolls. The February hiring index jumped to 56.5 from January’s 52.8. “We have yet to measure any significant decline in employment for the energy sector in the region. I expect that to change in the months ahead as lower oil prices work their way through the economy. Year-over-year job growth for the region is now approximately 1.4 percent, which is unchanged from last month, but still well above the historic average,” said Goss.
Confidence: The confidence index, which reflects expectations for the economy six months out, slipped to 41.5 from January’s 43.6. “Global economic turmoil along with low energy and farm prices have negatively affected the outlook of bank CEOs in energy and agriculture dependent portions of the region,” reported Goss.
Home and retail sales: The February home-sales index climbed to 50.9 from January’s 45.3. The February retail-sales index inched up to a frail 43.7 from 43.6 in January.
Jeff Bonnett, president of Havana National Bank in Havana, Ill., reported that many of his customers commute to cities for employment. “The lower fuel prices here in early 2015 have been very helpful to these folks, which has helped the local restaurants and economy.”
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