The rural economy keeps chugging along, according to the Creighton University Rural Mainstreet Index. For the ninth straight month, the RMI has stayed above growth neutral.
For August 2021, the RMI fell slightly to a healthy 65.3 from July’s 65.6. The index ranges between 0 and 100, with a reading of 50 representing growth neutral.
Around one-third of bank CEOs reported that their local economy expanded between July and August.
“Solid grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “USDA data show that 2021 year-to-date agriculture exports are more than 25% above that for the same period in 2020. This has been a prime factor supporting the Rural Mainstreet economy.”
Bank CEOs were asked: What is the biggest economic challenge for agriculturally dependent community banks for next 12 months?
Here are the top three results:
- 41%: Low loan demand
- 28%: Low interest rates
- 16%: Drought
For an 11th straight month, the farmland price index advanced significantly above growth neutral. The August reading expanded to 76.6 from July’s 71. This is the first time since 2012-2013 that Creighton’s survey has recorded 11 straight months of farmland prices above growth neutral.
The August farm equipment-sales index declined to 64.7 from 67.2 in July. Readings over the last several months represent the strongest consistent growth since 2012.
Almost one third of bankers support immediately beginning the reduction (taper) of Federal Reserve buying of U.S. Treasury bonds and mortgage-backed securities. Another 25% say the Federal Reserve should begin the reduction or taper in the fourth quarter of 2021.
The confidence index, which reflects bank CEO expectations for the economy six months out, decreased for a third straight month to 59.7 from July’s 65.6.
“Rising COVID-19 infections, the turmoil in Afghanistan, and negative views of current infrastructure bills before Congress damaged the economic outlook of bank CEOs,” Goss says. “Only 9.4% of bankers support passage of the $3.5 trillion infrastructure bill currently winding through Congress.”
Three of four bankers encourage Congress to reject the $3.5 trillion infrastructure bill due to its unnecessary spending.
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.
