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Associated Press, Published May 18 2012

Bankers survey shows rural economies remain strong

OMAHA, Neb. — The economy remains strong in rural areas of 10 Midwest and Western states because of the health of agricultural businesses there, according to a new survey of banks serving rural areas.

The overall economic index included in the monthly Rural Mainstreet survey rose to 58.5 in May from April's already healthy 57.1. Any score above 50 on the index, which ranges from 1 to 100, suggests growth in the months ahead.

The survey covers parts of Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming, focusing on 200 rural communities with an average population of 1,300.

Jeff Bonnett, president of Havana National Bank in Havana, Ill., said farmers appear to be off to a good start this spring with early planting and great early growing conditions.

“Our bank is encouraged with the ag environment at this time,” Bonnett said.

But Creighton University economist Ernie Goss said even though the May numbers are positive, he believes the region's economic growth will slow in the months ahead as the global economy weakens and crop prices decline.

The farmland index declined to 64.6 in May from April's 69.4, but it remains well above 50, suggesting that prices for farmland will keep increasing.

The Federal Reserve Bank of Kansas City said recently that farmland in its territory, which includes several of the states in the Rural Mainstreet report, jumped more than 25 percent in the first quarter.

The farm equipment sales index increased to 65.1 from April's 62.4 suggesting farmers also continue to buy new equipment.

Goss, who oversees the survey, said farm income remains strong because of increasing demand for U.S. crops from developing nations. Strong farm income and the current low interest rates have contributed to higher farmland prices and equipment sales.

The May hiring index was 59.2, just below April's 59.3 reading. Goss said job growth varies widely across the region with some of the strongest employment growth coming in areas where significant oil, natural gas and coal mining are happening. For example, he said rural parts of North Dakota and Colorado saw better job growth than Nebraska and Missouri.

The confidence index, which measures how confident bankers are in the economy over the next six months, remained strong at 60.2 in May even though it was slightly lower than April's 60.6.

The home sales index climbed to 65.2 in May from April's 60.8, and the retail sales index improved to 54.7 from April's 52.9.

Bankers said they were seeing more demand for loans, so the May lending index grew to 56.9 from April's 52.8.

The checking deposit index decreased to 62.9 in May from April's 72.6. And the savings index dropped to 41.7 in May from April's 53.5, suggesting bank customers were putting less into savings accounts or certificates of deposits in May.


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