A new survey of rural bankers from 11 Midwest and Plains states suggests that middle America's farm economy is still hurting but slowly recovering.
The Rural Mainstreet Index released Friday rose for a fourth straight month, to 40.9 for December from 38.4 in November, 37.5 in October and 36.5 in September.
The survey covers Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming. It hit a record low with 16.9 in February.
But December's number remains well below what is considered healthy, said Creighton University economist Ernie Goss, who oversees the survey.
The index ranges from 0 to 100. A score below 50 suggests the economy will contract in the next few months; above 50 indicates the economy will expand.
Declines in farm income continue to weigh heavily on rural, agriculturally dependent economies, Goss said
The December farmland-price index slid to 44.9 from November's weak 45.6 — the 14th straight month the index remained below 50.
There are, however, reports of increasing farmland prices in some areas.
"Several land auctions in our area this past month have shown steady to slightly stronger prices," said Dan Coup, CEO of First National Bank in Hope, Kan. Coup reported that local farmers and ranchers, not outside investors, were buying the land.
The farm equipment-sales index rose slightly to 40.4 from November's 39.9 and October's 36.7.
The new-hiring index sank to 33.4 from November's 36.3, with just under 6 percent of bankers reporting an upturn in hiring and more than 39 percent detailing hiring cuts.
"Congress' health care proposals have lots of small business people sitting on their hands on hiring until they see what the costs are going to be," said Richard Hanneken, CEO of MRV Banks in Sainte Genevieve, Mo.
The loan-volume index remains weak, despite the U.S. Treasury Department's call for increased lending. The December loan-volume index rose to a still-weak 45.7, up from November's record low 38.3.
More than half of bank CEOs responding to the survey's question about weak lending indicated that bank regulators were the prime factor restricting the amount of lending. More than two-thirds said weak loan demand was the major factor driving down borrowing by farms and small businesses.
"The federal government tells banks to lend to small business, but the regulators don't have the same message," said Pete Haddeland, president of the First National Bank in Mahnomen, Minn.
The survey's confidence index, which tracks bankers' economic outlook six months out, rose to 53.7 from 50.1 in November, but was down from October's 58.7.
On the Net:
Creighton University economic surveys: http://www2.creighton.edu/business/economicoutlook
