The Midwest's rural economy is still growing but a bit more slowly, according to a survey of bankers in 10 states that also indicated a slowdown in farmland price increases and the first drop in farm equipment sales in three years.

Lower prices for grain and other commodities may mean slower growth in coming months, the bankers indicated.

The Rural Mainstreet Index, intended to reflect the rural economy, was at 55.8 in the latest survey. An index above 50 indicates growth. The index was 57.3 in July and 47.1 in August 2012.

Rural Mainstreet Index

The figures are from a survey of 188 bank executives in rural and nonurban areas of Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. An index of 50 is neutral. Higher numbers show expansion, lower numbers show decline. The forecast predicts economic activity in six months.

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Category July August
Overall 57.3 55.8
Loan volume 75.7 70.5
Checking deposits 53.7 51.7
CDs 42 43.5
Ag land prices 58.2 55.8
Ag equipment sales 50 49.2
Home sales 76.6 72.5
Hiring 60.7 59.2
Retail 53.1 52.6
6-month forecast 56.6 53.4

Ernie Goss, the Creighton University economist who originated the index with Greeley, Neb., banker Bill McQuillan, said weaker farm commodity prices are dampening the rural economy, although growth continues “at a reasonable pace.”

The August index is based on a survey of 188 rural and small-town bank executives in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

Farmland prices continue to grow, but the land price index was down in August for the eighth time in the past nine months. Goss said he expects that growth to weaken along with commodity prices.

Farmers have been willing to pay more for land than investors, he said, and the amount of land coming up for sale is down significantly. The bankers said about one-fifth of their farmland sales are made to nonfarm investors.

Farm equipment sales have been increasing steadily from 2009 until this month, Goss said, when that index slipped below the growth-neutral level of 50. Equipment dealers may end up with some unsold inventory, he said, even though the lower grain prices will help livestock producers.

The survey's confidence index, reflecting the bankers' view of the economy six months from now, was 53.4, down from 56.6 in July. That also reflected weaker commodity prices, Goss said.

The hiring index remained strong at 59.2, although down slightly from July's 60.7. Home sales remained strong, while retail sales grew but more slowly.

Iowa's index was 56.9 in August, down from 62.3 in July. Its farmland price index was 53.2, down from 54.6 in July.

Nebraska's index was 56.2, down from 58 in July. Its farmland price index showed prices declining, at 47.7 in August, down from 48.5 in July.

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