Creighton University’s Rural Mainstreet Index fell for the fourth straight month in July as rising input costs hamper bank CEO expectations.
The index, which dropped three points to 46 this month, fell below the growth-neutral reading of 50 for the second straight month as more than half of bank CEOs say rising input costs pose the greatest economic threat to farmers over the next 12 months. Ernie Goss, Jack A. MacAllister chair in regional economics at Creighton University’s Heider College of Business, said the readings symbolize “a downturn in economic activity.”
“Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth,” he said. Farmers and bankers are bracing for escalating interest rates — both long-term and short-term.”
Bank CEOs were also optimistic about labor and farm conditions. Though labor shortages persist, the new hiring index increased three points to 60 in July. Regional non-farm employment has increased by nearly 3 percent over the past 12 months.
The farm economy remains strong. Bankers expect farm loan delinquencies to fall by a half-percentage point and farmland prices to increase by only 2 percent over the same time. The region’s farmland price index, which has risen above growth-neutral for nearly two straight years, fell 10 points to 66 in July. The farm equipment sales index fell 15 points to 56.
The loan volume index fell six points this month to 72. The checking-deposit index dropped 10 points to 47, while the index for certificates of deposit and other savings instruments slightly decreased two points to 33. “Escalating costs of farm inputs supported strong borrowing from farmers,” Goss said.
Despite positive sentiments, overall banker confidence remains low as worsening economic conditions along with high energy and ag input prices caused the business confidence index to fall seven points to 26, its lowest level since May 2020.
The report tracks bank CEO sentiments in rural areas of a 10-state region dependent on agriculture and/or energy, including Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, South Dakota, North Dakota and Wyoming.