The Midwestern economy is improving heading into 2023, according to Creighton University’s monthly Rural Mainstreet Index.
The RMI, which tracks the sentiments of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, rose five points to 50.1 this month, the first time the reading has been above the growth-neutral score of 50 since May.
The region’s farmland price index fell three points to 65.4 in December, the 27th straight month that the index has been above growth-neutral. Nearly one-quarter of bankers expected high farmland prices to discourage investments in farm operations next year. The index for farm equipment sales increased one point to 60, while the loan volume index rose seven points to 72.1. More than 33 percent of CEOs said that higher interest rates are not hampering farm equipment sales as many farmers pay with cash.
The reading for certificates of deposit and other savings instruments increased to 51.9. “Higher farm input costs, greater farm equipment sales and drought conditions in portions of the region supported strong borrowing from farmers. At the same time, higher interest rates encouraged greater CD purchases by farmers,” said Ernie Goss, director of Creighton’s Economic Forecasting Group.
Only one-third of bank CEOs predicted that 2023 will be a good year to invest in farm operations. Executives anticipate that regional net farm income will increase by 10 percent this year, which is lower than the U.S. Department of Agriculture’s projected 13.8 percent growth.
Still, only one-third of bank CEOs predicted that 2023 will be a good year to invest in farm operations. Banking executives expect regional net farm income to increase by 10 percent this year, which is lower than the U.S. Department of Agriculture’s projected 13.8 percent growth.
The index for business confidence only increased two points this month to 29.6 due to “the slowing economy, strong energy prices, higher borrowing costs and elevated agriculture input costs,” according to the report.
Other report findings included:
- The retail-sales index remained at 45.5. “Bankers were pessimistic regarding the economic outlook for the Christmas and holiday buying season as they expect growth of less than 1 percent, or 0.8 percent, from the 2021 season,” the report stated.
- The index for home sales fell one point this month to 33. “This is the seventh straight month that the home-sales index has fallen below growth-neutral,” Goss said. “An almost doubling of the 30-year mortgage rate over the past year slowed home sales in the region over that time period.”
- The checking-deposit index increased to 48.1 from November’s 47.7, while the index for certificates of deposit and other savings instruments increased six points to 51.9.
- The new hiring index remained at 49.1 in December as labor shortages continued to restrict growth, according to the report. Still, non-farm employment increased by 3.3 percent over the past 12 months.