The uncertainty surrounding the national economy — including the 'fiscal cliff,' the farm bill and energy policy — are negatively affecting the economic outlook of bankers.
San Francisco, CA (PRWEB) November 28, 2012
The Rural Mainstreet Index, compiled each month by researchers at Creighton University, has been released and shows for the third consecutive month that growth is expected in the Midwest and West. Even so, the survey also showed concern among bankers regarding the potential impact of the looming fiscal cliff in the U.S.
The Rural Mainstreet Index is based on a survey of rural bankers in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.
A majority of the bankers surveyed expressed concern over the expiration of tax cuts and the over $600 billion in federal budget cuts that are set to go into effect at the end of the year. This so-called fiscal cliff is the biggest drag on confidence and economic growth in the Midwest, according to the survey results. The fact that Congress is split, with Republicans controlling the house and Democrats controlling the Senate, simply adds to the uncertainty and worry.
"The uncertainty surrounding the national economy — including the 'fiscal cliff,' the farm bill and energy policy — are negatively affecting the economic outlook of bankers," Creighton University economist Ernie Goss, who oversees the survey said.
The broad index increased to 57.5 in November from 56.6 in October, which shows the Midwest is "shedding the negative impacts of the 2012 drought," said Goss. The index is based on a 100 point scale, with any reading above 50 indicative of growth. There are five components to the overall index: Farming, banking, hiring, confidence, and home and retail sales.
All five of these components showed increases, with the exception of the Confidence Index, which shows future economic expectations six months out. This component dropped from an October reading of 50.7 to 45.6 in the current month.
The survey also questioned the bankers about the future of the ethanol industry and nearly 70 percent said they felt that high corn prices would be the biggest challenge for ethanol producers over the coming 12 months.
One of the drivers of these high corn prices has been the price of farmland in the Midwest, which has been increasing over the past year. Correspondingly, the Farmland Price Index also made its largest gains since the survey was started in 2005, rising from 71.7 in October to 83.9 in November.
"Farmland prices and cash rents are soaring at what I believe are unsustainable paces," Goss said.
Overall, the results of the survey show optimism for growth along with strong concern over the federal regulatory, tax, and budget environments. Midwest bankers see growth in the region, however that growth is being tempered by weakness in the macroeconomic scene.
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