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Bankers See Negative Tariff Impacts on Economy
USAgNet - 07/19/2019

The Creighton University Rural Mainstreet Index (RMI) for July rose above growth neutral for the month. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the RMI for July indicated positive growth for the region.

Overall: The overall index fell to 50.2 from 53.2 in June. This is the seventh time in the past eight months that the index has remained above growth neutral. The index ranges between 0 and 100 with 50.0 representing growth neutral, and an RMI below the growth neutral threshold. 50.0, indicates negative growth for the month.

"Higher agriculture commodity prices and rebuilding from recent floods supported the Rural Mainstreet Index (RMI) for the month. Furthermore, almost nine of 10 bankers reported tariffs and trade skirmishes have had, or will have, a negative impact on their local economy. This is up from eight of 10 recorded last September," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Farming and ranching: The farmland and ranchland-price index for July improved to a still weak 45.6 from June's 44.8. This is the 68th straight month the index has remained below growth neutral 50.0.

The July farm equipment-sales index increased to 37.9 from June's 35.7. This marks the 71st straight month the reading has remained below growth neutral 50.0.

Banking: Borrowing by farmers for July remained very strong. The borrowing index slipped to 71.9 from June's 72.6. The checking-deposit index rose to 51.5 from June's 50.0, while the index for certificates of deposit and other savings instruments slumped to 47.1 from 51.6 in June.

Bankers reported that approximately one in ten 2018 farm operating loans were not repaid and were rolled into 2019 loans.

But James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa, said, "I think you will find that most banks don't roll over 2018 unpaid operating notes into the 2019 LOC notes. If there is still grain to cover operating debt, we extend the loan until it is marketed."

Less than half of the bank CEOs think the Federal Reserve should reduce short-term interest rates at their July meetings.

Hiring: The employment gauge climbed to a very strong 66.2 from June's 64.5. Despite tariffs and flooding over the past several months, Rural Mainstreet businesses continue to hire at a solid pace.

Over the past 12 months, the Rural Mainstreet economy added jobs at a 0.3% pace compared to a higher 1.2 % for urban areas of the same 10 states. Rural areas in three Rural Mainstreet states, Iowa, Missouri, and Nebraska lost jobs over the past 12 months.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, slipped to 51.5 from June's 53.3, indicating a positive, but somewhat weak economic outlook among bankers.

Home and retail sales: The home-sales index decreased to a still strong 67.6 from June's 69.4. The retail sales index for July plummeted to 47.1 from June's 58.1. "It appears that the region experienced a significant slump from June's solid reading," said Goss.

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 (RMI) 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.

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