Rural Mainstreet Economic Index Falls Below Growth Neutral

The Creighton University Rural Mainstreet Index (RMI) fell for the sixth time in the past seven months, sinking below growth neutral for a fifth consecutive month, according to the 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 for October once again sank below growth neutral to 44.2 from 46.3 in September. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral. This was the fifth consecutive month the overall reading has fallen below growth neutral.

"The Rural Mainstreet economy is now experiencing a downturn in economic activity. Almost one in four bankers, or 23.1%, reported that the economy was already in a recession. Approximately, three of four bankers expect a recession to begin in 2023," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Farming and ranching: The region's farmland price index for October declined to 58.0 from September's 61.1 but moved above growth neutral for the 25th straight month.

Jim Rothermich of the Land Talker reported on farmland sales auctions in Iowa between October 8-14: "Plymouth County takes top honors this week with a sale at $26,250/acre (55.6 acres), breaking the last state record of $26,000/acre set in Sioux County on August 31, 2022."

Jim Eckert, president of Anchor State Bank in Anchor, Ill., reported that, "Corn yields are about the same as 2021. Early reports indicate soybean yields are a little lower than 2021."

This month, bankers were asked to estimate the increase in farm equity for 2022. On average, bankers forecast a 3.4% boost in farm equity from 2021 levels. This compares to a 4.2% projection from the USDA for the nation's farmers.

Farm equipment sales: For the second time in the past three months, the farm equipment-sales index slumped below growth neutral to 47.8 from September's 58.0. The index has risen above growth neutral for 21 of the last 23 months.

Banking: The October loan volume index dropped to a still strong 76.8 from 79.5 in September. The checking-deposit index fell to 34.0 from September's 46.3, while the index for certificates of deposit and other savings instruments rose to 46.2 from 34.6 in September. "Higher farm input costs and drought conditions in portions of the region supported stronger borrowing from farmers," said Goss.

Hiring: The new hiring index for October was unchanged from September's 49.2. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses. Despite labor shortages, Rural Mainstreet expanded non-farm employment by 2.9% over the past 12 months. This compares to 3.0% growth for urban areas of the same 10 states for the same period of time.

Confidence: The slowing economy, strong energy prices, higher borrowing costs and elevated agriculture input costs pushed the business confidence index down to 30.8 from 40.7 in September. "This is the lowest reading for the confidence index since May 2020," said Goss.

Home and retail sales: The home-sales index sank to a very weak 36.0 from September's 46.2. The retail-sales index for October improved to 50.0 from September's 46.0. "Despite October's higher reading, bankers were not optimistic about the Christmas and holiday buying season as they expect growth at less than 1.0%, or 0.8%, from the 2021 season," said 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. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey and launched it in January 2006.

Missouri's October RMI climbed to 63.6 from 57.3 in September. The farmland-price index fell to 68.0 from September's 71.1. The state's hiring gauge sank to 50.1 from 61.3 in September. Over the past 12 months, BLS data show that Missouri's Rural Mainstreet Economy experienced a 7.3% increase in non-farm employment, while urban areas in the state gained 1.6% in non-farm employment.