Rural Mainstreet Economy Soars to Highest Level in 15 Months
For the first time since July 2023, the overall Rural Mainstreet Index (RMI) rose above growth neutral, according to the November survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: The region’s overall reading for November climbed to a soft 50.2 from October’s very weak 35.2. It was the highest reading since July of last year. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“Yields have been healthy across the region and have offset some of the weakness in farm commodity prices. Likewise, lower fuel costs and lower short-term interest boosted the modest improvement in farm conditions for the month. Even so, more than eight of 10 bankers see lower ag commodity prices as the greatest threat to the farmer,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
Farm Equipment Sales: The farm equipment sales index slumped to 14.6, its lowest level since October 2016, and was down from 18.8 last month. “This is the 16th straight month that the index has fallen below growth neutral. High borrowing costs, tighter credit conditions and weak farm commodity prices are having a negative impact on the purchases of farm equipment,” said Goss.
Farming and Ranching Land Prices: For the sixth time in the past seven months, farmland prices sank. However, the region’s farmland index improved to a weak 44.4 from October’s six-year low of 38.5. “Elevated interest rates and higher input costs, along with below break-even grain prices, have significantly reduced farmer demand for ag land,” said Goss.
Interest Rates: Approximately 64.3% of bankers recommended that the Federal Reserve make no change to short-term interest rates at its December meeting. The remaining 35.7% advocated a 0.25% reduction.
Banking: The November loan volume index declined to a solid 58.9 from a strong 73.1. The checking deposit index fell to 59.3 from 63.7 in October. The index for certificates of deposits (CDs) and other savings instruments sank to 53.7 from 63.5 in October. The Federal Reserve’s higher interest rate policies have boosted CD purchases above growth neutral for 24 straight months.
Hiring: The new hiring index for November was unchanged from October’s 50.0.
Confidence: Rural bankers remain pessimistic about economic growth for their area over the next six months. The November confidence index increased to a weak 46.4, its highest level since March 2022, and up from October’s 29.6. “Weak agriculture commodity prices and negative farm cash flow, combined with downturns in farm equipment sales over the past several months, continued to place banker confidence below growth neutral,” said Goss.
Home and retail sales: Home sales sank to 42.6 from October’s weak 46.3. Likewise, retail sales in the region were very weak with a November reading of 42.0, up from October’s even weaker 36.0.
Source: Creighton.edu
