The regional economy grew at a faster but still limited pace this month, limited by higher borrowing costs and tight credit conditions, 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 increased to 41.7 from 40.4 in November, its fourth straight month of falling below 50. Any reading above that number indicates growth expectations, while any number below 50 indicates contraction.
“This is the sixth time in the past seven months that the index has fallen below growth-neutral,” said Ernie Goss, Jack A. MacAllister chair in regional economics at Creighton University’s Heider College of Business.
Thirteen percent of bank CEOs said their local economy was already in a recession, while another 43.3 percent anticipate a recession early next year. The confidence index more than doubled to 43.3 from a record low of 21.2 in November amid continued high interest rates, deposit outflows and the slowing farm economy.
Approximately 40 percent of CEOs identified a potential drop in farm income next year as their top threat in 2024. The region’s index for farmland prices increased a half-point to 67.2 from 66.7 in November. Goss said the survey pointed to strong but slowing growth in farmland prices. The index for farm equipment sales remained at 49.5.
Farm loan delinquencies fell to one-tenth of one percentage point over the past six months. According to the International Trade Administration, the export of agricultural products from the region fell 14.7 percent to $12 billion for the first 10 months of this year from $14.1 billion in 2022.
“Higher borrowing costs and tighter credit conditions are having a negative impact on the purchases of farm equipment,” Goss said. “For a third consecutive month, several bankers voiced concerns over economic losses of pork producers in their area.”
December’s loan volume index increased to 80.9 from 57.9 in November. The checking deposit index fell to 41.4 from 56 in November, the 10th time so far this year that the index has been below 50. The index for certificates of deposits and other savings instruments grew to 65.5 from 58 in November.
Indexes for home sales and retail sales fell below 50 for the second straight month in December. The home-sales index increased to 43.3 from 32 in November as continued high mortgage rates and a lack of home construction supplies limit the index. The retail-sales index grew to 46.6 from 44.2 in November.
“High consumer debt and elevated interest rates are cutting into retail sales in rural areas of the region,” Goss said.