Rural Economy Growing At Healthy Pace

Includes: DBA
by: T. Marc Schober

The rural economy continued to grow at a healthy pace in July, although expectations for lower grain prices and farm income slowed the rate of expansion. Rural bankers now expect farm income in 2013 to be 3% below last year's level.

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The Rural Mainstreet Index (RMI) decreased to 57.3 in July from 60.5 in last month's survey. Ernie Goss, economist at Creighton University, commented: "Last year at this time, the drought was having a significant negative impact on the Rural Mainstreet economy. This year, ample moisture has boosted the rural economy and the banker's economic outlook."

The farmland price index decreased in July for the seventh time in the last eight months, but remains above growth neutral at 58.2. Goss also noted, "Our farmland-price index has been above growth neutral since February 2010. However, lower farm commodity prices and expected declines in farm income are slowing growth in farmland prices."

Bankers who were surveyed were asked to project farm income for 2013. The majority, 59.6%, estimated that farm income will decrease compared to 2012. On average, bankers believe income will fall by 3%. Only 19.5% estimated increases and 20.9% expect no change.

The loan-volume index drastically increased to 75.7 from 66.7 last month. The checking-deposit index advanced to above growth neutral, 53.7, from June's 48.5. The hiring index declined to 60.7 in July from 61.4 in June. "Readings over the past several months are consistent with an annualized growth rate in jobs of 1%. Businesses linked to agriculture and energy continue to add jobs at this slow, but positive pace," said Goss.

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This survey represents an early snapshot of the economy of rural, agricultural, and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.