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Rural Mainstreet Index Moves Higher in April

Gina Clark

“As a result of solid farm financial conditions, the farm equipment-sales index fell to a still solid 54.3 from 59.5 in March.”

After declining below growth neural for March, the overall Rural Mainstreet Index expanded above the threshold for the month, according to the April monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

April 2023 Survey Results at a Glance:

  • April’s overall reading, the Rural Mainstreet Index (RMI), rose above growth neutral for the month.
  • More than three of four, or 76.2%, of bank CEOs oppose the recent “bailout” of Silicon Valley Bank and Signature Bank.
  • Two-thirds of bank CEOs oppose all bank bailouts (i.e., community, regional and multibillion dollar banks).
  • Approximately 64% of bankers reported depositors exiting due to higher financial risks.
  • Checking deposits plummeted to a record low.
  • Farmland prices expanded for the 31st straight month.

Overall: The region’s overall reading in April climbed to 50.1 from March’s 45.6. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. 

Mike Van Erdewyk, CEO of Breda Savings Bank in Breda, Iowa, said, “It seems like a self-fulfilling prophecy that they will say higher rates stopped inflation when it may be more of unprecedented government actions not letting the market sort it out.”

Farm equipment sales: As a result of solid farm financial conditions, the farm equipment-sales index fell to a still solid 54.3 from 59.5 in March. The index has risen above growth neutral for 27 of the last 29 months.

Farming and ranching land prices: The region’s farmland price index rose to 64.6 from March’s 63.0. This was the 31st straight month that the index has advanced above 50.0. 

Banking: The April loan volume index slipped to a still healthy 62.5 from 63.0 in March. The checking-deposit index plummeted to a record low 25.0 from March’s 40.9, while the index for certificates of deposit and other savings instruments dipped to 74.0 from March’s record high 75.0.

The record low checking deposit index is a real concern. According to Jeffrey Gerhart, former Chair of the Independent Community Bankers of America, “Depositors may move money around in order to keep under the $250,000 FDIC limit. This goes on frequently, so I don’t consider this a concern.” 

Bank CEOs were asked several questions regarding the recent bank failures of Silicon Valley Bank and Signature Bank:

  • More than three of four, or 76.2%, of bank CEOs oppose the recent Biden/Yellen/Fed bank bailout of Silicon Valley Bank and Signature Bank.
  • Two-thirds of bank CEOs oppose all bank bailouts (i.e., community, regional and multibillion dollar banks).
  • Approximately 29.1% support bailouts of all banks posing systemic risks.
  • Approximately 64% reported depositors exiting due to higher financial risks.

Hiring: The new hiring index for April climbed to 54.2 from 45.5 in March. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses. Over the past 12 months, the Rural Mainstreet Economy has expanded jobs by 2.8% compared to a lower 2.1% for urban areas of the same 10 states.

Confidence: The slowing economy, higher borrowing costs and labor shortages continued to constrain the business confidence index to a weak 38.0, down from March’s 39.1. “Over the past 12 months, the regional confidence index has fallen to levels indicating a very negative outlook,” said Goss.

Home and retail sales: Home-sales climbed to 44.0 from March’s 36.4. “This is the eleventh straight month that the home-sales index has fallen below growth neutral. A slowing economy, higher mortgage rates and low housing inventories for the past year slowed home sales in the region over that time period,” said Goss.

The retail-sales index for April increased slightly to a weak 41.7 from March’s 41.3. “Bankers were pessimistic regarding the economic outlook for retail sales for the second quarter after an anemic quarter one,” 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.

Source: Creighton.edu