Banker Confidence in the Rural Economy Drops to Two-Year Low

For the sixth time in the past seven months, the rural economy has posted signs of weakness. That’s according to the Rural Mainstreet Index (RMI) from Creighton University.

Rural Mainstreet Index
Rural Mainstreet Index
(Rural Mainstreet Index)

For the sixth time in the past seven months, the rural economy has posted signs of weakness. That’s according to the Rural Mainstreet Index (RMI) from Creighton University.

For October 2022, the RMI sits at 44.2. That is down from September’s 46.3. This was the fifth consecutive month the overall reading has fallen below growth neutral.

“The Rural Mainstreet economy is now experiencing a downturn in economic activity,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “Almost one in four bankers reported the economy was already in a recession. Approximately, three of four bankers expect a recession to begin in 2023.”

The slowing economy, strong energy prices, higher borrowing costs and elevated agriculture input costs pushed the business confidence index down to 30.8 from 40.7 in September.

“This is the lowest reading for the confidence index since May 2020,” Goss says.

This month, bankers were asked to estimate the increase in farm equity for 2022. On average, bankers forecast a 3.4% boost in farm equity from 2021 levels. This compares to a 4% projection from the USDA for the nation’s farmers.

“Higher farm input costs and drought conditions in portions of the region supported stronger borrowing from farmers,” Goss says.

Farmland Still Shows Strength
The region’s farmland price index for October declined to 58 from September’s 61.1. However, the index has remained above growth neutral for the 25th straight month.

Jim Rothermich of the Land Talker reported on farmland sales auctions in Iowa between Oct. 8-14: “Plymouth County takes top honors this week with a sale at $26,250 per acre (55.6 acres), breaking the last state record of $26,000 per acre set in Sioux County on Aug. 31, 2022.”

For the second time in the past three months, the farm equipment-sales index slumped below growth neutral to 47.8 from September’s 58. The index has risen above growth neutral for 21 of the last 23 months.

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