For the seventh time in eight months the rural economy has shown above-neutral growth, according to the Rural Mainstreet Index (RMI). The monthly survey of bank CEOs in a 10-state Midwest region is at 50.2 for July 2019, which is down from 53.2 in June.
The index ranges between 0 and 100 with 50 representing growth neutral. June’s level of 53.2 is the highest so far in 2019. In 2018, the highest level was 56.3, which was seen in May.
“Higher agriculture commodity prices and rebuilding from recent floods supported the Rural Mainstreet Index (RMI) for the month,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “Furthermore, almost nine of 10 bankers reported tariffs and trade skirmishes have had, or will have, a negative impact on their local economy. This is up from eight of 10 recorded last September.”
Borrowing by farmers for July remained very strong. The borrowing index slipped to 71.9 from June’s 72.6. Bankers reported one in 10 farm operating loans from 2018 were not repaid and were rolled into 2019 loans.
“I think you will find that most banks don't roll over 2018 unpaid operating notes into the 2019 LOC notes,” says James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa. “If there is still grain to cover operating debt, we extend the loan until it is marketed.”
Less than half of the bank CEOs think the Federal Reserve should reduce short-term interest rates at their July meetings.
The farmland and ranchland-price index for July improved to a still weak 45.6 from June’s 44.8. This is the 68th straight month the index has remained below growth neutral 50.0.
The July farm equipment-sales index increased to 37.9 from June’s 35.7. This marks the 71st straight month the reading has remained below growth neutral 50.0.
The confidence index, which measures expectations for the economy six months out, is at 51.5. That’s down from June’s 53.3, indicating a positive, but somewhat weak economic outlook among bankers.
This survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives 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 in 2005.
Meet the man behind the Rural Mainstreet Index: Ernie Goss.