Rural Mainstreet economy shrinks for sixth straight month

OMAHA — The Creighton University Rural Mainstreet Index fell below growth neutral for a sixth consecutive month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

The region’s overall reading for November once again sank below the growth neutral threshold. The November index did increase to a weak 45.7 from 44.2 in October. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral. This was the sixth straight month the overall reading has fallen below growth neutral.

“The Rural Mainstreet economy is now experiencing a downturn in economic activity. Last month, almost one in four bankers, or 23.1%, reported that the economy was already in a recession,” said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

The region’s farmland price index rose to 68.2 from October’s 58.0. This was the 26th straight month that the index has climbed above 50.0.

Bankers were also asked their expectations for the direction of farmland prices in the next 12 months. Approximately, 60.9% expect farmland prices to plateau at current prices, while 21.7% expect prices to decline over the period. The remaining 17.4% of bankers expect prices to expand, but at a slower pace.

The farm equipment-sales index jumped to a strong 59.5 from October’s weak 47.8. The index has risen above growth neutral for 22 of the last 24 months.

This month, bankers were asked if their bank was asking for greater upfront financial commitments for farm loans. Only 13.6% indicated an increase in such commitments. The remaining 86.4% reported no change in upfront commitments for farm loans.

The November loan volume index dropped to a still strong 65.8 from 76.8 in October. The checking-deposit index increased to 47.7 from October’s 34.0, while the index for certificates of deposit and other savings instruments slipped to 45.5 from 46.2 in October.

“Higher farm input costs, greater farm equipment sales, and drought conditions in portions of the region supported strong borrowing from farmers,” Goss said.

The new hiring index for November dipped to 49.1 from October’s 49.2. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses. Despite labor shortages, Rural Mainstreet expanded non-farm employment by 3.6% over the past 12 months. This compares to 3.2% growth for urban areas of the same 10 states for the same period of time.

The slowing economy, strong energy prices, higher borrowing costs and elevated agriculture input costs pushed the business confidence index down to 27.3 from 30.8 in October. “This is the lowest reading for the confidence index since May 2020,” said Goss.

The home-sales index sank to a very weak 34.8 from October’s 36.0. “This is the sixth straight month that the home-sales index has fallen below growth neutral. A doubling of the 30-year mortgage rate over the past year slowed home sales in the region over that time period,” said Goss.

The retail-sales index for November weakened to 45.5 from October’s 50.0. “Bankers were pessimistic regarding the economic outlook for the Christmas and holiday buying season as they expect growth at less than 1.0%, or 0.8%, from the 2021 season,” said Goss.

The Nebraska RMI remained below growth neutral for November but did rise to 44.7 from October’s 40.1. The state’s farmland-price index rose to 69.2 from last month’s 55.2. Nebraska’s November new-hiring index dipped to 50.7 from 51.5 in October. Over the past 12 months, BLS data show that Nebraska’s Rural Mainstreet Economy experienced a 2.9% increase in non-farm employment, while urban areas in the state added 2.5% in non-farm employment.

Other states included in the 10-state survey are Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, North Dakota, South Dakota and Wyoming.

The survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. The index provides the most current real-time analysis of the rural economy. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey and launched it in January 2006.