Rural Mainstreet Index ticks up for June

The Creighton University Rural Mainstreet Index increased to a weak level from May’s feeble reading. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, June’s reading represented the third straight month with recessionary economic conditions.

The overall index for June climbed to 37.9, well below growth neutral, but up from May’s 12.5 and April’s record low 12.1. The index ranges between 0 and 100.

Borrowing by farmers expanded for June, but at a slower rate than in May. The borrowing index fell to 63.6 from May’s 72.2. The checking-deposit index declined to 77.3 from May’s 86.1, while the index for certificates of deposit and other savings instruments increased to 51.5 from 48.6 in May.

“Loan volume and checking deposits were impacted by the PPP loan program, causing spikes in deposit growth until the businesses spent the money,” said Todd Douglas, CEO of the First National Bank in Pierre, S.D. “We expect deposits to decrease in the next 45 days while the loans will remain elevated until borrowers get the debt forgiveness from the U.S. government.”

More than one-fourth of surveyed CEOs expect farm loan defaults and foreclosures to be the greatest economic challenge for their area of the next 12 months. Another third expected low commodity prices to hold that slot.

Almost one-third of bankers with local ethanol plants reported current production shutdowns, either permanent and temporary.

Farmland prices continued their slide but at a slower pace, with a June reading of 46.8 up from May’s 39.7. This is the 78th time in the past 79 months the index has been below growth neutral.

 The June farm equipment-sales index increased to a weak 32.8 from 21.9 in May, marking the 81st straight month the reading has remained below growth neutral 50.0.

Ernie Goss

“Even with a slight recent rebound in prices, farm commodity prices are down by 7.3 percent over the last 12 months. As a result, and despite the initiation of $16 billion in USDA farm support payments, only 3 percent of bankers reported positive economic growth,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

The confidence index, which reflects bank CEO expectations for the economy six months out, improved to 43.8 from May’s 22.1. “Weak agriculture commodity prices, and layoffs have decimated economic confidence among bankers,” Goss said.

The home-sales index increased to 57.8 from May’s 48.6. The retail -sales index for June expanded to a frail 28.9 from May’s 11.1.

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.