Bank CEO economic confidence fell to a 17-year low this month amid high interest rates, deposit outflows and the slowing farm economy, according to Creighton University’s monthly survey of bank CEOs in rural areas of a 10-state region.
The index tracking economic confidence fell to 21.2 from 24.1 in October, its lowest reading since Creighton started the monthly survey in January 2006. “Approximately 57.7 percent of bankers expect economic conditions to worsen in the next six months,” said Ernie Goss, chair in regional economics at Creighton’s Heider College of Business.
The overall Rural Mainstreet Index fell to 40.4 from 44.4 in October, its lowest reading since June 2020, Any reading below 50 indicates worsening economic conditions. Goss attributed the decrease to “weaker farm and non-farm economies.”
The region’s farmland price index increased 11 points to 66.7. Goss said farmland prices are still strong but slowed this month amid weakening farm commodity prices. Farm equipment sales increased to 49.5 from 48 in October, the fifth time in the past six months that the index has fallen below growth-neutral. Regional exports of agriculture products fell 13 percent to $8.6 billion this year from $9.8 billion in the first nine months of 2022.
“Higher borrowing costs are having a negative impact on the purchases of farm equipment,” Goss added.
The checking deposit index increased 29 points to 56 this month, its first time indicating growth since January. The November loan volume index fell 20 points to 57.9 while the index for certificates of deposits and other savings instruments dropped to 58 from 59.6 in October.
Most bankers want the Federal Reserve to hold interest rates at its next meeting Dec. 12-13. Earlier this month, the Federal Reserve Open Market Committee kept the target range for the Federal Funds Rate at between 5.25 and 5.50 percent.
“Higher short-term interest rates produced by Federal Reserve rate hikes over the past year continue to pose a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have not risen as significantly over the same time period,” Goss noted.
Home and retail sales fell below 50 this month, with the retail-sales index dropping to 44.2 from 46.3 in October and the home-sales index falling to 32 from 40.4. “Higher mortgage rates are sinking home sales in rural areas,” Goss added.
The survey includes bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.