An August Rural Mainstreet Index report released Aug. 19 by Creighton University revealed a still strong but flat economic outlook.
The overall August index fell slightly to 65.3 from July’s 65.6. The Rural Mainstreet Index ranges from 0 to 100 with a reading of 50 representing growth-neutral. For the ninth straight month, RMI remained above growth-neutral in the country’s central states. The survey represents an early snapshot of rural ag and energy-dependent portions of the region.
Approximately 34.4 percent of bank CEOs said that their local economy had expanded between July and August. The overall index remains in a range showing strong growth for the month.
“Solid grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. USDA data show that 2021 year-to-date agriculture exports are more than 25 percent above that for the same period in 2020. This has been a prime factor supporting the Rural Mainstreet economy,” said Ernie Goss, Jack A. MacAllister chair in Regional Economics at Creighton University’s Heider College of Business.
Approximately 15.6 percent of bankers reported that continuing drought conditions pose the greatest threat to banking operations over the next 12 months. Due to strong farm financial conditions, the study found that 40.6 percent of bank CEOs saw low loan demand as their bank’s greatest challenge over the next 12 months.
The RMI focuses on approximately 200 rural communities with an average population of 1,300 in 10 states: Illinois, Minnesota, North Dakota, South Dakota, Wyoming, Colorado, Iowa, Kansas, Missouri and Nebraska. The RMI fell in Colorado, Iowa, Kansas, Missouri and Nebraska and increased in Illinois, Minnesota, North Dakota, South Dakota and Wyoming.
Farming and ranching
For an 11th straight month, the farmland price index advanced significantly above growth-neutral. The August reading expanded to 76.6 from July’s 71, the first time since 2012-13 that Creighton’s survey recorded 11 straight months of farmland prices above growth-neutral.
Banking
The August loan volume index was unchanged from July’s 53. The checking-deposit index rose to 68.8 from July’s 67.7, while the index for certificates of deposit and other savings instruments increased to 34.4 from 32.3 in July.
Due to strong farm finances, 40.6 percent of bank CEOs saw low loan demand as their bank’s biggest challenge over the next 12 months. Almost one-third of bankers said they support immediately beginning the reduction of Federal Reserve buying of U.S. Treasury bonds and mortgage-backed securities. Another 25 percent said the Fed should begin the reduction or tapering in 4Q 2021.
Hiring, confidence
The new hiring index increased to 70.3 from 67.6 in July. The report found that labor shortages continue, however, to be a major issue for rural businesses.
“[There are] too many open jobs looking for employees. Several local restaurants closed due to no workers,” said Shawn Davis, CEO of CNB Bank & Trust in Carlinville, Ill.
The confidence index, which reflects bank CEO expectations for the economy six months out, decreased to 59.7 from July’s 65.6.
“Rising COVID-19 infections, the turmoil in Afghanistan and negative views of current infrastructure bills before Congress damaged the economic outlook of bank CEOs. Only 9.4 percent of bankers support passage of the $3.5 trillion infrastructure bill currently winding through Congress,” said Goss.
Home and retail sales
August’s home sales index soared to a record 84.4 from July’s 77.4. The retail-sales index for August dropped to 54.7 from July’s 64.1.
“Healthy farm prices and federal spending are having very positive impacts on Rural Mainstreet retail sales,” Goss said.