After declining below growth neutral in March, the overall Rural Mainstreet Index for July expanded above the threshold for a fourth straight month, according to the July monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: The region’s overall reading in July slipped to 55.6 from June’s 56.9. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“After negative growth during the first quarter of this year, the rural mainstreet economy experienced positive but slow economic growth for the second quarter and has now started the third quarter on a healthy note,” says Creighton University’s Dr. Ernie Goss who conducts the survey. Farming and ranching land prices: The region’s farmland price index rose to 64.6 from 59.3 in June and 56.3 in May. This was the 34th straight month that the index has advanced above 50.0.
Bankers report that, on average, non-farm investors secured approximately 17.1% of farmland sales in their area over the past six months. This is almost double the 9.1% reported by bankers in April 2022 when the same question was asked.
Farm equipment sales: The farm equipment-sales index for July stood at a tepid 50.0, which was up from 48.3 in June. “Higher borrowing costs have begun to negatively impact purchases of farm equipment,” observes Goss.
Bank CEOs were asked to comment on the Federal Reserve’s current short-term interest rate policy. More than nine of ten, or 92.5%, indicated that the Fed should cease raising rates. Only 7.5% indicated that the Fed should continue to raise short-term interest rates.
“Higher short-term interest rates produced by Federal Reserve’s rate hikes over the past year have posed 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,” observes Goss.
Confidence: Higher interest rates, deposit outflows and a rising regulatory environment continue to constrain the business confidence index to a weak 44.4, up from 43.1 in June. “Over the past 12 months, the regional confidence index has fallen to levels indicating a negative outlook,” notes Goss.
The 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. The index provides the most current real-time analysis of the rural economy.