- After four straight months of above growth neutral readings, the Rural Mainstreet Index (RMI) slumped to growth neutral, 50.0, in August.
- Farmland cash rents are expected to expand by 1.3% over the next year.
- Less than one-third of bank CEOs expect a “soft landing” for the economy. Approximately one-third anticipate a “hard landing,” or negative growth from Federal Reserve rate hikes.
- Bankers reported continuing record low deposits.
- Only 14.8% expect a stronger farm economy one year out. Almost one-half, or 48.2%, forecast a weaker farm economy 12 months out.
- The region’s agriculture exports contracted from $8 billion in the first half of 2022 to $6.8 billion for the same period in 2023 for a 14.6% slump.
Overall: The region’s overall reading in August fell to 50.0 from July’s much stronger 55.6. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“This is the fifth consecutive month that the overall RMI has moved at or above growth neutral. However, I expect recent pullbacks in growth to push the Federal Reserve to forgo an interest rate increase at its next meetings on September 19-20,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
A large share of bankers support a cessation of rate increases. Said Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa: “In my view, the Federal Reserve should take a long pause on any further increase in interest rates. It’s time for a breather.”
Farm Equipment Sales: The farm equipment-sales index for August slumped to 46.0 from July’s weak 50.0. “This is the fourth time in the past 12 months that the index has fallen below growth neutral. Higher borrowing costs have begun to negatively impact purchases of farm equipment,” said Goss.
Banking: The August loan volume index dipped to a still strong 75.0 from July’s 75.9. The checking deposit index sank to 30.8 from 32.7 in July, and the index for certificates of deposits and other savings instruments decreased to a strong 69.2 from 71.2 for July.
“Higher short-term interest rates produced by Federal Reserve rate hikes over the past year continue to pose a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have risen little over the same time period,” said Goss.
Hiring: The new hiring index for August fell to 51.9 from July’s 59.3. Over the past 12 months, the Rural Mainstreet Economy has expanded jobs by 2.8% compared to a lower 2.0% for urban areas of the same 10 states.
Confidence: Higher interest rates, deposit outflows and a rising regulatory environment continued to constrain the business confidence index to a weak 38.9, down from 44.4 in July. “Over the past 12 months, the regional confidence index has fallen to levels indicating a negative outlook,” said Goss.
According to data from the International Trade Association, the region’s agriculture exports contracted from $8 billion in the first half of 2022 to $6.8 billion for the same period in 2023 for a 14.6% slump.
This month, bankers were asked to assess the financial conditions for the farming economy one year from today. Only 14.8% expect a stronger farm economy one year out, while 48.2% anticipate a weaker economy 12 months out.
Regarding the Federal Reserve’s interest rate actions, only 29.6% of bank CEOs expect the Fed’s steps to achieve its inflation goal while limiting the increase in unemployment (i.e., a soft landing).
Jeff Bonnett, CEO of Havana National Bank in Havana, Ill., said, “A ramp up in consumer loan default (credit cards) and bankruptcy may be in the cards for 2024. This will not make for a ‘soft landing’ predicted by some optimists.”
Home and Retail Sales: Both home sales and retail sales moved above growth neutral for August. The August home-sales index rose to 59.3 from July’s healthy 55.8. “Despite higher mortgage rates, an increase in the housing inventory boosted sales across the region,” said Goss.
The retail-sales index for August dropped to 51.9 from July’s much stronger 59.6. “After an OK quarter two, bankers are getting more optimistic regarding the economic outlook for retail sales for the third quarter,” said Goss.
Colorado: Colorado’s RMI for August dropped to 53.2 from 65.7 in July. The farmland- and ranchland-price index for August declined to 64.3 from July’s 66.4. The state’s new hiring index was 58.0, down from 61.9 in July. According to data from the International Trade Association, Colorado’s agriculture exports expanded from $52 million in the first half of 2022 to $62 million for the same period in 2023 for 19.2% growth. Illinois: The August RMI for Illinois fell to 55.6 from July’s 59.0. The farmland-price index decreased to 60.5 from 64.5 in July. The state’s new-hiring index decreased to 53.2 from 59.6 in July. According to data from the International Trade Association, Illinois’ agriculture exports expanded from $1.47 billion in the first half of 2022 to $2.53 billion for the same period in 2023 for 71.6% growth. Jeff Bonnett, CEO of Havana National Bank in Havana said, “It will be interesting to see what impact the student loan repayment startup in October (after a 3.5 year break due to COVID relief) will have on the already struggling economy.” Iowa: Iowa’s August RMI dipped to 53.7 from 54.1 in July. Iowa’s farmland-price index dropped to 59.9 from July’s 63.1. Iowa’s new-hiring index for August sank to 52.6 from 57.9 in July. According to data from the International Trade Association, Iowa’s agriculture exports contracted from $1.25 billion in the first half of 2022 to $871 million for the same period in 2023 for a 30.2% slump. “The responses regarding the condition of farm financial well-being and prices are dependent on the extent of the drought conditions and the ultimate yields on crops this year,” said James Brown, CEO of Hardin County Savings Bank in Eldora. Kansas: The Kansas RMI for August sank to 51.1 from July’s 55.2. The state’s farmland-price index declined to 59.2 from 63.4. The new-hiring index for Kansas advanced to 59.0 from July’s 58.3. According to data from the International Trade Association, Kansas’ agriculture exports contracted from $1.30 billion in the first half of 2022 to $642 million for the same period in 2023 for a 50.5% slump. Minnesota: The August RMI for Minnesota sank to 47.7 from July’s 53.8. Minnesota’s farmland-price index expanded to 63.5 from 63.0 in July. The new-hiring index for August fell to 50.5 from 57.8 in July. According to data from the International Trade Association, Minnesota’s agriculture exports contracted from $826 million in the first half of 2022 to $589 million for the same period in 2023 for a 19.2% slump. | Missouri: The state’s August RMI dropped to 37.5 from 42.7 in July. The farmland-price index dropped to 55.4 from 59.9 in July. The state’s new hiring gauge slumped to 46.9 from 53.9 in July. According to data from the International Trade Association, Missouri’s agriculture exports contracted from $671 million in the first half of 2022 to $627 million for the same period in 2023 for a 6.6% slump. Nebraska: The Nebraska RMI fell to a solid 54.8 from 60.5 in July. The state’s farmland-price index for August dropped to 60.2 from 64.9 in July. Nebraska’s August new-hiring index declined to 53.0 from July’s 60.1. According to data from the International Trade Association, Nebraska’s agriculture exports contracted from $625 million in the first half of 2022 to $342 million for the same period in 2023 for a 45.2% slump. North Dakota: North Dakota’s RMI for August dropped to 52.1 from 61.7 in July. The state’s farmland-price index plummeted to 62.3 from 85.3 in July. The state’s new-hiring index declined to a solid 55.5 from July’s 60.6. According to data from the International Trade Association, North Dakota’s agriculture exports expanded from $452 million in the first half of 2022 to $454 million for the same period in 2023 for 0.5% growth. South Dakota: The August RMI for South Dakota slumped below growth neutral to 43.3 from July’s 49.0. The state’s farmland-price index declined to 57.0 from 61.7 in July. South Dakota’s August new hiring index declined to 48.9 from 56.1 in July. According to data from the International Trade Association, South Dakota’s agriculture exports expanded from $51 million in the first half of 2022 to $71 million for the same period in 2023 for 39.9% growth. Wyoming: The August RMI for Wyoming was unchanged from July’s 55.5. The August farmland- and ranchland-price index dropped to 60.4 from 63.5. Wyoming’s new-hiring index declined to 50.2 from July’s 58.4. According to data from the International Trade Association, Wyoming’s agriculture exports contracted from $5 million in the first half of 2022 to $3 million for the same period in 2023 for a 26.5% slump. |