Banking CEOs say the Midwestern economy remains strong but still faces challenges, according to Creighton University’s monthly Rural Mainstreet Index report.
The overall index fell in January to approximately 61 from 66.7 the previous month. The index ranges between 0 and 100 — a reading of 50 represents growth-neutral expectations. The index dropped in Colorado, Illinois, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. A higher reading was only observed in Iowa. The survey, which tracks the sentiment of bank CEOs in rural areas of a 10-state region, was above growth-neutral for the 14th straight month.
The banker confidence index, reflecting bank CEO expectations for the next six months, increased to 61.1 from 55.2 in December.
“Solid grain prices, the Federal Reserve’s record-low short-term interest rates, and growing agricultural exports have underpinned the Rural Mainstreet Economy,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
Banking conditions remain strong: The Farmland Price Index decreased to a still-strong 88.5 from December’s record high of 90. Bankers by a wide margin listed increasing farm input prices, such as fertilizer, as the top threat facing farming, followed by the delivery of farm inputs and rising interest rates. Bank CEOs expect the Federal Reserve to raise short-term interest rates by 70 basis points this year. Fewer than one-in-five anticipate four or more one-quarter percentage point rate hikes this year.
“Inflation is a serious problem here. Gasoline prices have nearly doubled since November 2020,” said Jim Eckert, president of the Anchor State Bank in Anchor, Illinois.
The report came one week after The Economic Advisory Committee, which consists of 16 chief economists from North America’s largest banks, announced that it expects U.S. economic growth to slow this year but still remain above long-term potential. Despite ongoing consumer worries over the omicron Covid-19 variant and the likelihood of future variants emerging, the economy was showing more resilience as more Americans became vaccinated.