After three straight months of readings slightly above growth neutral, the Creighton University Rural Mainstreet Index (RMI) fell below the growth neutral threshold of 50.0, according to the latest 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 March sank below the growth neutral threshold. The March index slumped to 45.6 from 50.1 in February. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“The rural mainstreet economy continues to experience slow, to no, to negative economic growth. Less than 1% of bankers reported improving economic conditions for the month with 92% indicating no change in economic conditions from February’s slow growth,” says Ernie Goss of Creighton University who conducts the monthly survey.
Farming and ranching: The region’s farmland price index decreased to 63.0 from February’s 63.5. This was the 30th straight month that the index has advanced above 50.0.
Across the region, farmland prices advanced by approximately 9% over the past 12 months. However, bankers, on averaexpect only 1% growth over the next 12 months.
Farm equipment sales: As a result of solid farm financial conditions, the farm equipment-sales index climbed to 59.5 from 52.1 in February. The index has risen above growth neutral for 26 of the last 28 months.
Bank CEOs were asked what interest rate action the Federal Reserve should undertake at their March 21-22 meetings. Approximately 56.5% recommended a 0.25% rate increase; 30.5% supported a 0.50% boost; and 13% advocated no rate change. However, most survey responses were completed prior to recent bank failures.
According to Jeffrey Gerhart, former Chair of the Independent Community Bankers of America, “It’s too bad that the Fed waited so long to raise interest rates. They could have begun raising interest rates sooner than they did and would not have had to raise them as fast as they’ve done.” Gerhart applauds the Fed for raising interest rates and its willingness to stay the course to get a handle on inflation.
Confidence: The slowing economy, higher borrowing costs and labor shortages continued to constrain the business confidence index to a weak 39.1 from 44.4 in February. “Over the past 12 months, the regional confidence index has fallen to levels indicating a very 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.