“The farm equipment-sales index climbed to 60.4 from 59.5 in November. The index has risen above growth neutral for 23 of the last 25 months.”Rural Mainstreet Index – December 15, 2022
After six straight months of below growth neutral readings, the Creighton University Rural Mainstreet Index (RMI) climbed above the growth neutral threshold, 50.0, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: For the first time since May of this year, the region’s overall reading in December rose above the growth neutral threshold. The December index did increase to a tepid 50.1 from 45.7 in November. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.
“The Rural Mainstreet economy continues to experience slow, to no, to slightly negative economic growth. On average, bankers expect 2022 net farm income in the region to expand by 10.0% in comparison to USDA’s projected growth of 13.8% for the nation’s farmers,” 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 climbed to 60.4 from 59.5 in November. The index has risen above growth neutral for 23 of the last 25 months. This month, bankers were asked if higher interest rates are negatively affecting farmer purchases of agriculture equipment. More than one in three bankers, or 34.5%, reported that rates were not impacting sales, while approximately 19.2% reported that higher interest rates were restricting the purchase of farm equipment.
Farming and ranching: The region’s farmland price index declined to 65.4 from November’s 68.2. This was the 27th straight month that the index has climbed above 50.0. On average, almost one-fourth, or 24.7%, of bankers expect high farmland prices to discourage investments in farm operations in 2023.
Banking: The December loan volume index rose to a very strong 72.1 from 65.8 in November. The checking-deposit index increased to 48.1 from November’s 47.7, while the index for certificates of deposit and other savings instruments expanded to 51.9 from 45.5 in November. “Higher farm input costs, greater farm equipment sales and drought conditions in portions of the region supported strong borrowing from farmers. At the same time, higher interest rates encouraged greater CD purchases by farmers,” said Goss.
Retail sales: The retail-sales index for December was unchanged from November’s weak 45.5. “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.
Confidence: The slowing economy, strong energy prices, higher borrowing costs and elevated agriculture input costs continued to constrain business confidence index to a very weak 29.6, up from 27.3 in November. “Over the past nine months, the regional confidence index has fallen to levels indicating a very negative outlook,” said Goss.
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. It 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.