Federal Reserve rate hikes are the greatest challenge in the 12 months ahead, according to bankers from a 10-state region in the center of the United States. Respondents to the Rural Mainstreet Index rated rising bank regulations a distant second.
The index showed positive growth for a third straight month, hitting its highest level since May 2022, according to the June monthly survey of bank CEOs in rural areas of the agriculture- and energy-dependent region. The region’s overall RMI reading in June climbed to 56.9, the highest reading since May 2022 and up from last month’s 55.8.
“After negative growth during the first quarter of this year, the Rural Mainstreet economy experienced positive, but slow, economic growth for all of the second quarter. Only 3.4 percent of bankers reported a downturn in economic conditions for the month,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
The region’s farmland price index rose to 59.3 in June from 56.3 in May. This was the 33rd straight month that the index has advanced above 50.0. The farm equipment-sales index fell to a weak 48.3 from 50.2 in May.
Farm equipment sales declined for only the third time in the past 31 months. More than half of bankers reported that higher interest rates were impairing farm equipment purchases. “Higher borrowing costs have begun to negatively impact purchases of farm equipment,” Goss said.
The June loan volume index expanded to a strong 79.2 from May’s 75.0. After two consecutive low monthly readings, the checking-deposit index increased to a weak 37.5 in June from 22.0 in May, while the index for certificates of deposit and other savings instruments soared to 76.8 for June from May’s 70.0.
“Bankers continue to have a very positive outlook for the payment of farm loans with an estimated loan default rate rising less than 1 percent over the next 12 months,” said Goss.
Higher interest rates, deposit outflows and a rising regulator environment continued to constrain the business confidence index to a weak 43.1, but up from 38.5 in May.
The RMI covers rural areas of 10 states: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.