The Rural Mainstreet Index posted its seventh straight month above growth neutral, marking a return to brighter days. Concerns about drought and inflation, however, are beginning to surface in the central states dependent on ag and energy.
The RMI index decreased to 70.0 from last month’s record high 78.8, and just under half of the bank CEO respondents reported that their local economy expanded between May and June. The confidence level of respondents also remained high, at 71.7, but decreased from May’s 78.8.
The June loan volume index declined to 54.9 from May’s 59.0. The checking-deposit index fell to a very solid 70.0 from May’s 87.9, while the index for certificates of deposit, and other savings instruments, slumped to 35.0 from 43.9 in May.
Current or possible drought was a source of concern for bankers. Approximately one-fourth identified a downturn in farm income, and another quarter named rising government regulation as the greatest threats.
More than half, or 53.3 percent of respondents worried about the current uptick in the consumer price index. Only 30 percent expect the increase to be transitory, and more than three-fourths think the Federal Reserve should begin raising interest rates before the end of 2021.
For a ninth straight month, the farmland price index stayed well above the survey’s growth neutral mark of 50.0. The June reading slipped to a very strong 75.9 from May’s 78.1. The farm equipment-sales index rose to 71.6 from 67.9, its highest level since 2012, and up from May’s 67.9. After years below growth neutral, the equipment sales index has been robust the last seven months.
“Strong grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural economic activity remains below pre-pandemic levels,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
The new hiring index slipped to 71.7 from 72.7 in May. Despite recent solid job gains for the region, data from the U.S. Bureau of Labor Statistics indicate that nonfarm employment levels for the Rural Mainstreet economy are down by almost 89,000 (nonseasonally adjusted), or 2 percent, compared to pre-COVID-19 levels.
The RMI surveys community bank presidents and CEOs each month in nonurban agriculturally and energy-dependent areas regarding current and projected economic conditions in their communities. Bankers come from about 200 small towns with an average population of 1,300 in 10 states: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.
Goss and Bill McQuillan, former chair of the Independent Community Banks of America, created the monthly economic survey in 2005.