Economic stability and growth are returning to rural America. Nearly 50% of rural bankers report their local economy expanded between May and June, according to the June 2021 Creighton University Rural Mainstreet Index (RMI).
For June, the monthly survey of bank CEOs in a 10-state Midwest region sits at 70. While that’s a slight dip from May’s 78.8, it marks the seventh straight month of above-growth-neutral rating. The index ranges between 0 and 100 with a reading of 50 representing growth neutral.
“Strong grain prices, the Federal Reserve’s record-low interest rates and growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural economic activity remains below pre-pandemic levels,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI.
The June farmland price index sits at a strong 75.9. While that’s a small drop from May’s 78.1, it marks the first time since 2013 RMI has recorded nine straight months of farmland prices above growth neutral.
In a similar trend, the June farm equipment sales index rose to 71.6 from 67.9, its highest level since 2012, and up from May’s 67.9. After 86 straight months of readings below growth neutral, farm equipment sales bounced into growth territory for the last seven months. This is the best growth in this index since 2012.
More than three-fourths of the bankers think the Federal Reserve should begin raising interest rates before the end of 2021.
Bankers were asked to name the greatest threat to 2021-22 bank operations. Here are their responses:
- Rising bank regulations (25%)
- Downturn in farm income (25%)
- Cyber threats (21%)
- Rampant inflation (17%)
- Labor shortages (8%)
- COVID-19 (4%)
Another serious problem highlighted by Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, is national debt.
“In my view, $29,000,000,000,000 in total debt with no real plan to reduce that debt or balance the annual budget is the biggest threat to our economy’s success,” Winum says.
He argues that neither political party, nor the Federal Reserve, has engaged in a serious discussion to solve the problem.
The confidence index, which reflects bank CEO expectations for the economy six months out, decreased to 71.7 from May’s 78.8.
“Federal stimulus checks, strong grain prices and advancing exports have supported a healthy confidence number,” said Goss says.
This RMI, which started in 2005, represents an early snapshot of the economy of rural agricultural and energy-dependent portions of the nation. It focuses on 200 rural communities with an average population of 1,300.
