Creighton University’s Rural Mainstreet Index, (RMI) for May signaled an improvement in the rural economy as overall Area Economic Index rose for the third consecutive month. The Confidence Index displayed improvement as well, but on the other hand, farm equipment sales and farmland prices dropped.

The overall Area Economic Index rose this month from 21.7 up to 36.2. This is the highest the index has been since last September, but marks the fifteenth consecutive month that the index has been below 50. Any index below 50 indicates negative growth and any over 50 indicates positive growth. Rising over 14 points is a great start for the Area Economic Index. Let’s see if it can continue its rise in the next few months.

As for the farming indexes; the Farming Equipment Sales Index fell to a new four year low of 28.3. “This is not record low territory for farm machinery sales. In the 1980s, there were no sales and no bottom to the market for a long period,” said Jim Brown CEO Hardin County Savings Bank in Eldora, Iowa. We would like to see it rise above 50, but are aware that farmers are putting off that new piece of equipment until they have higher farming income.

The Farmland Price Index fell just 2 points to 39.2. For the past six months, this index has been hovering in the high 30’s. After its high of 81.0 in January of 2008, the Farmland Price Index looks to have almost leveled off and displayed a bottom.

Finally, the Confidence Index, which represents banker’s and Bank CEO’s confidence in the economy six months out, rose to 56.0. This is the first time that the index has been above 50 since September of 2007, and now represents positive growth. Rural Mainstreet, bankers and CEOs are predicting better days to come.

 

This month’s indexes give us positive insight on the future of the rural Midwest economy. Although farm equipment sales have hit some serious lows, bankers have confidence that they can pull through these hard times. If it is any indication, the Home Sales Index and Retail Sales Index both jumped up 15 points this month signaling that people are spending again.

Like usual, we pay close attention to the Farmland Price Index. This month we saw a slight decline of two points. Over the past few months we have predicted that this is the low point for the index and it should rebound instead of falling further, which could mean it is the lowest it is going to be for a long time.

It’s great news that the Confidence Index broke 50. With the confidence rising, other indexes should follow. We also note that the Farmland Price Index has extended the window for investors to jump in at low prices. It won’t be long before we see farmland prices start to rise again.

- Colvin