A Creighton University monthly economic survey is indicating slowing but still optimistic economic growth expectations across the Midwest for the fourth straight month.
Creighton’s September Rural Mainstreet Index remained above growth-neutral (62.5) for the 10th straight month, according to the survey, which tracks economic conditions and six-month projections for community bank presidents and CEOs in nonurban ag and energy-dependent areas of a 10-state region: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. The index ranges between 0 and 100 with a reading of 50.0 representing growth-neutral.
The region’s Farmland Price Index advanced above growth-neutral for a 12th straight month to a record high 85.2 from August’s 76.6. This month’s Farm Equipment Sales Index increased to 66 from 64.7 from last month. Readings over the last several months constitute the strongest consistent growth in nearly a decade.
“Solid grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy, said Ernie Goss, Jack A. MacAllister chair in regional economics at Omaha, Neb.-based Creighton’s Heider College of Business. “USDA data show that 2021 year-to-date agriculture exports are more than 27.6 percent above that for the same period in 2020. This has been an important factor supporting the Rural Mainstreet economy. More than eight (in) 10 bankers expect, if implemented, the stepped-up basis portion of President Biden’s $3.5 trillion bill before Congress to have a negative impact on the Rural Mainstreet economy.”
The Confidence Index, reflecting bank CEO expectations for the economy six months out, increased for the first time since May to 65.4 from August’s 59.7. More than eight in 10 bankers expect the stepped-up basis part of President Joe Biden’s $3.5 trillion bill to have a negative impact on the Rural Mainstreet economy.
Don Vogel, CEO of Farmers National Bank in Sterling, Ill., said losing the stepped-up basis “is a significant issue as it relates to farmland being passed on to the next generation.” However, he said losing the stepped-up basis was more of a major issue for investors.
“Improving farm exports, healthy agriculture prices, and healthy consumer spending pushed the economic outlook upward. On the other hand, 53.6 percent of bank CEOs reported that the Delta variant of Covid-19 was having (a) rising negative economic impact,” Goss said.
Nearly two-thirds of bank CEOs expect the Fed to begin reducing bond buying stimulus payments before the end of this year, and approximately 35.7 percent of bank CEOs said their local economy had expanded between August and September.
Banking
September’s loan volume index grew to 58.9 from August’s 53. The checking deposit index sank 10 points from August, while the index for certificates of deposit and other savings instruments increased but remained below growth-neutral. Nearly two-thirds of bankers expect the Fed to begin reducing their economically stimulative monthly bond purchases before the end of this year.
“I expect this pullback in monthly purchases to push long term interest rates slightly higher in the fourth quarter of 2021,” Goss said.
Hiring
The New Hiring Index slightly fell to 67.9 from 70.3 in August. Labor shortages continued having a significant impact for Rural Mainstreet businesses.
Home and retail sales
The Home Sales Index dropped to 71.4 from August’s record high 84.4. The Retail Sales Index rose to 58.9 this month from 54.7 in August.
“Healthy farm prices and federal stimulus spending are having very positive impacts on Rural Mainstreet retail sales and home sales,” Goss said.