For the third time in the past four months, the Creighton University Rural Mainstreet Index was above growth neutral, rising to 52.0 from December’s 51.6. Loan demand remained well below growth neutral although farmland prices continued to improve.
Loan volume remained low, dropping to 33.9 in January from December’s 43.7, but up from November’s record low 25.8. The checking-deposit index soared to record high 88.0 from December’s 78.1, while the index for certificates of deposit, and other savings instruments increased to 46.0 from 42.2 in December.
The confidence index, which reflects bank CEO expectations for the economy six months out, declined slightly to a still healthy 60.0 from December’s 62.9. Excessive inflation topped a list of banker concerns for the overall economy (see table below), while low loan demand and increased defaults and bankruptcies caused the most anxiety for individual banks.
“Approximately 44 percent of bank CEOs expect low loan demand to be the greatest issue facing their banks for 2021. This is up from 7 percent that recorded this as a top concern last year at this time,” Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business. “One year ago, 32 percent of bankers indicated that rising loan defaults and bankruptcies were their greatest concern for 2020. This is significantly above the 4 percent of bankers that registered this as their greatest 2021 issue,”
For a fourth straight month, the farmland price index advanced above growth neutral. The January reading climbed to 56.3, its highest level since July 2013, and was up from 55.0 in December. This is first time since 2013 that Creighton’s survey has recorded four straight months of above growth neutral farmland prices.
The January farm equipment-sales index rose to 54.5, its highest reading since April 2013, and up from 50.2 in December. After 86 straight months of readings below growth neutral, farm equipment sales bounced into growth territory for the last two months.
“Recent sharp improvements in agriculture commodity prices, federal farm support payments, and [the] Federal Reserve’s record low short-term interest rates have underpinned the Rural Mainstreet Economy in a solid and positive growth range. However, the rural economy remains well below pre-pandemic levels.” Goss said.
The RMI surveys community bank presidents and CEOs each month in nonurban agriculturally and energy-dependent areas regarding current and projected economic conditions in their communities. Bankers come from about 200 small towns with an average population of 1,300 in 10 states: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.
Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.
| Top 2021 Concerns for National Economy | |
|---|---|
| Issue | Average Score (on a 1-6 scale) |
| 1. Excessive inflation & higher long-term interest rate | 4.1 |
| 2. A double-dip recession (W-shaped recover) | 4.0 |
| 3. Trade restrictions and/or higher tariffs | 3.6 |
| 4. Higher loan defaults and bankruptcies | 3.4 |
| 5. Rising federal taxes | 3.0 |
| 6. Higher and more restrictive regulations | 2.8 |
Source: Creighton University’s January 2021 Rural Mainstreet Survey