Recession, Part 2?

About 40 percent of the bankers polled in a regional economic survey said they expected the economy to dip back into a recession in 2011.

The Rural Mainstreet Index for August dropped to 46, compared with 49.3 in July and 52.6 in June.

A score of 50 is considered growth neutral. A number above 50 indicates economic expansion; below 50 indicates contraction.

Creighton University economist Ernie Goss, co-author of the report, said rural bank executives are seeing “significant pullbacks in economic activity.”

Despite the survey respondents’ pessimistic outlook, the index for all banking economic indicators remained above growth neutral for the sixth straight month.

The index for farmland prices increased for the seventh straight month, from 52.5 in July to 55.3 in August. That indicates farming income is holding up well, Goss said.

The loan volumes index was 54.2, and the checking deposit index was 59.1. The index for certificates of deposit and other savings dropped to 54.2 in August from 55.4 in July, but it remained in the growth category.

Hiring remained weak, although it did improve during the first half of August.

“Most states in the region continue to lose jobs,” Goss said. “Over the past year, rural main street has lost approximately 3.5 percent of its total employment.”

Of the bankers polled in 10 Midwest states, 43 percent said a 2011 recession was likely or very likely, and 26 percent said it was unlikely or very unlikely. The remaining 31 percent said they were unsure what the economy would do in the coming year.

“There is too much uncertainty coming from Washington, D.C.,” said Frank Sulentrop, president of Legacy Bank in Colwich, Kan. “Businesses do not like to take financial risks in uncertain times.”

Nebraska’s overall score slid in August to 48.7, compared with 53.2 the previous month. Iowa’s score also slipped below growth neutral for the month to 48, compared with 52.5 in July.

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