Rural Mainstreet Index at highest level in almost 5 years

The Creighton University Rural Mainstreet Index climbed above growth neutral in May for a fourth straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy. This is the first time since July 2015 that we have recorded four straight months of overall indices above growth neutral.

The overall index rose to 56.3, its highest level since July 2013, and up from 53.5 in April. The index ranges between 0 and 100 with 50.0 representing growth neutral. “Surveys over the past several months indicate the Rural Mainstreet economy is trending upward with improving, and positive economic growth. While agriculture commodity prices have improved recently, prices remain below breakeven for a large share of grain farmers,” said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business, Omaha, Nebraska.

More than one-third, or 36.4 percent of bank CEOs identified rising regulatory costs as the top economic challenge to their banking operations over the next five years.

Sector reports

Farming and ranching: The farmland and ranchland-price index for May declined to 42.2 from April’s 42.9. This is the 54th straight month the index has fallen below growth neutral 50.0.

Bankers were asked the average cash rent per acre of farmland in their area. On average, bankers reported $239 per acre which is down by approximately 3 percent from this time last year.

According to Lonnie Clark, president of the State Bank of Chandler in Chandler, Minnesota, “Late planting due to late snow melt and wet conditions.”

On the other hand, Jim Eckert, CEO of Anchor State Bank in Anchor, Illinois, reported, “Planting is behind schedule and the area is very dry.”

The May farm equipment-sales index climbed to a weak 43.8 from April’s 37.8. This marks the 57th consecutive month the reading has moved below growth neutral, 50.0.

Banking: Borrowing by farmers expanded for May as the loan-volume index rose to 74.3 from 68.7 in April. The checking-deposit index plummeted to 43.9 from April’s 56.0, while the index for certificates of deposit and other savings instruments sank to 40.9 from 45.3 in April.

Bankers were asked to project farm loan defaults over the next 12 months. On average, bank CEOs expect farm loan defaults to increase by only 3 percent over the next 12 months. This compares to an expected increase of almost 5 percent recorded last year at this time. 

“Clearly even with 2018 net farm income rising little from 2017, bankers expect little increase in farm loan defaults,” said Goss.

Hiring: The employment gauge fell to a still healthy 56.0 from April’s 64.0. The Rural Mainstreet economy is now experiencing positive year-over-year job growth. The Rural Mainstreet economy has added jobs at a 1.3 percent pace over the past 12 months compared to a lower 0.9 percent for urban areas of the region. Job growth in rural areas is now exceeding that of the urban areas of the 10-state region.

Confidence: The confidence index, which reflects expectations for the economy six months out, was unchanged from April’s 50.0 indicating little economic optimism among bankers. “An unresolved North America Free Trade Agreement and rising trade tensions with China continue to be a concern,” said Goss.

Home and retail sales: The home-sales index moved higher for the Rural Mainstreet economy in May advancing to 62.1 from April’s 57.1. The May retail-sales index slumped to 46.9 from April’s 53.6.

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.

This 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. 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.

State reports

Colorado: Colorado’s Rural Mainstreet Index for May expanded to 58.8 from 54.8 in April. The farmland and ranchland-price index dipped to 42.8 from April’s 43.4. Colorado’s hiring index for May declined to 60.6 from April’s 68.9. Colorado’s Rural Mainstreet job growth over the last 12 months is 4.6 percent.

Iowa: The May RMI for Iowa slipped to 54.0 from 54.5 in April. Iowa’s farmland-price index for May slipped to 42.1 from April’s 43.3. Iowa’s new-hiring index for May sank to 53.5 from April’s 67.5. Iowa’s Rural Mainstreet job growth over the last 12 months is minus 0.9 percent.

Kansas: The Kansas RMI for May climbed to 56.2 from April’s 53.9. The state’s farmland-price index decreased to 42.1 from 43.0 in April. The new-hiring index for Kansas declined to 53.9 from April’s 65.3. Kansas’s Rural Mainstreet job growth over the last 12 months is 1.5 percent.

Minnesota: The May RMI for Minnesota rose to 56.0 from April’s 54.7. Minnesota’s farmland-price index decreased to 42.1 from 43.4 in April. The new-hiring index fell to 53.1 from April’s 68.6. Pete Haddeland, CEO of the First National Bank in Mahnomen reported, “Spring planting conditions vary a lot in our area.” Minnesota’s rural Mainstreet Job grow over the last 12 months is minus 1 percent.

Missouri: The May RMI for Missouri jumped to 59.0 from 57.0 in April. The farmland-price index declined to 43.2 from 44.3 in April. Missouri’s new-hiring index for May bounced to 64.9 from April’s 54.1. Missouri’s Rural Mainstreet job growth over the last 12 months is 1.1 percent.

Nebraska: The Nebraska RMI for May expanded to 56.0 from April’s 54.0. The state’s farmland-price index increased to 42.0 from last month’s 39.9. Nebraska’s new-hiring index sank to 52.8 from 65.4 in April. Nebraska’s Rural Mainstreet job growth over the last 12 months is none.

South Dakota: The May RMI for South Dakota moved above growth neutral climbing to 56.5 from April’s 52.8. The state’s farmland-price index decreased to 42.2 from April’s 43.4. South Dakota’s new-hiring index fell to 54.9 from 68.9 in April. South Dakota’s Rural Mainstreet job growth over the last 12 months is 1.3 percent.

Wyoming: The May RMI for Wyoming rose to 57.5 from April’s 52.9. The May farmland and ranchland-price index rose to 42.7 from 38.9 in April. Wyoming’s new-hiring index declined to 59.0 from April’s 74.1. Wyoming’s Rural Mainstreet job growth over the last 12 months is 1.5 percent.