Bank CEO economic expectations remain limited as economic confidence drops and recessionary fears grow, according to Creighton University’s November Rural Mainstreet Index.
The overall index, which captures the sentiments of bank CEOs in a 10-state region dependent on agriculture, increased one point to 45 this month, according to the report, the sixth straight month that the reading has fallen under the growth-neutral score of 50.
High commodity prices and worsening economic conditions continue to wreak havoc on the economic outlook. The index for economic confidence fell three points to 27, its lowest reading since May 2020. Approximately 75 percent of bankers expect a recession will begin next year.
“The Rural Mainstreet economy is now experiencing a downturn in economic activity,” said Ernie Goss, Jack A. MacAllister chair in regional economics at Creighton University’s Heider College of Business. “Last month, almost one in four bankers, or 23.1 percent, reported that the economy was already in a recession.”
Farm prices remain strong. The region’s farmland price index increased 10 points this month to 68, the 26th straight month that the index has been above growth-neutral. The index for farm equipment sales increased 12 points to 59 this month. November’s loan volume index fell 11 points to 65. Farm equipment sales fell for the second time in the past three months.
“Higher farm input costs, greater farm equipment sales, and drought conditions in portions of the region supported strong borrowing from farmers,” Goss said.
Only one in five CEOs expect farmland prices to drop next year. Bank CEOs project farm equity this year to be 3.4 percent above 2021 levels, according to the report, lower than the U.S. Department of Agriculture’s 4.2 percent estimate.
Though labor shortages continued to restrict growth for businesses, the report stated that regional non-farm employment grew by 3.6 percent over the past 12 months. A majority share of bankers (39 percent) recommended the Fed increase interest rates by 50 basis points during its next meeting in December. Thirty percent recommended the Fed stop raising rates.
The survey includes Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.