The Rural Mainstreet Index declined in July, the second month in a row the survey of bank CEOs in rural areas of 11 Great Plains states has shown a decline. The index has shown no growth for the past 17 months. (See chart above.)
Ernie Gross, the Creighton University economist who maintains the index, said that a weak global economy had hurt the farm sector of the Midwestern economy. Land sales and sales of farm equipment have weakened in recent months and only 6.3 percent of the bankers surveyed for the index forecast an increase in farm income over 2008. The CEOs interviewed said the problem with farming wasn’t yields, but low prices. Yields will be 10-15 percent higher than last year, but prices are expected to be 25 percent lower. Hiring remains weak in these small towns, as the rural areas of the region have lost 5 percent of their jobs in the last 12 months. At the same time, home sales have continued to decline and loan volumes have slackened.
None of the bank CEOs said the effects of the stimulus package had been large or meaningful; more than a third said the impacts of the increased federal spending had been zero. Gross asked the bankers if they favored a tax on high income Americans to pay for expanded health care coverage. More than two-thirds said they definitely did not support such a tax. Only 2.1 percent favored a tax on the wealthiest to pay for coverage of the uninsured.