The regional economy continues to grow, albeit at a slower pace than in June, according to Creighton University’s monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
The Rural Mainstreet Index fell to 55.6 from 56.9 in June, remaining above the growth-neutral reading of 50 for the fourth straight month. Higher interest rates, deposit outflows and a rising regulatory environment continued to limit the business confidence index, which increased to 44.4, up from 43.1 in June.
“After negative growth during the first quarter of this year, the Rural Mainstreet economy experienced positive but slow economic growth for the second quarter and has now started the third quarter on a healthy note,” said Ernie Goss, Jack A. MacAllister chair in regional economics at Creighton University’s Heider College of Business.
July’s loan volume index fell to a still-strong 75.9 from 79.2 in June, according to the report. The index for checking deposits fell to 32.7 from 37.5 in June, and the index for certificates of deposit and other savings instruments fell to 71.2 from 76.8 in June.
Farmland prices increased for the 34th straight month. According to the report, non-farm investors acquired 17 percent of regional farmland sales, up from 9 percent in April 2022. The index for farm equipment sales was at 50, up from 48.3 in June. “Higher borrowing costs have begun to negatively impact purchases of farm equipment,” Goss said.
The vast majority of bankers said the Fed should stop raising interest rates. More than 75 percent expect Treasury Secretary Janet Yellen’s policy encouraging bank M&A would harm community banks and farmers. Goss said higher short-term interest rates from the Fed’s rate hikes over the past year “posed a significant threat to community banks by expanding the costs of customer deposits, while the rates on bank loans have risen little over the same time period.”
Other report findings included:
- The new hiring index increased to 59.3 from June’s 58.9. Over the past 12 months, Rural Mainstreet Economy employment has increased by 2.3 percent, compared to 1.6 percent for urban areas.
- July’s home sales index increased to 55.8 from 48.2 in June. “Despite higher mortgage rates, an increase in the housing inventory boosted sales across the region,” Goss said.
- The retail-sales index increased to 59.6 from 56.9 last month. “After an OK second quarter, bankers are getting more optimistic regarding the economic outlook for retail sales for the third quarter,” Goss said.