Mainstreet Economy

October Rural Mainstreet Index Climbs Again: Trade War and Stalled USMCA Batters Economic Confidence

October Survey Results at a Glance:

  • After falling below growth neutral in August, the Rural Mainstreet Index jumped slightly above 50.0 for September and October.
  • Bank CEOs across the region reported significantly lower corn and soybean yields.
  • Economic confidence fell to lowest level in two years.
  • Almost three of four bankers reported negative impacts from the trade war.
  • Approximately 43% of bankers support halting Federal Reserve rate hikes over the next 12 months.

OMAHA, Neb. (Oct. 17, 2019) – The Creighton University Rural Mainstreet Index (RMI) for October climbed above growth neutral, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The overall index rose to 51.4 from 50.1 in September. Although still weak, this is the highest reading since June of this year. It also marked the third time in the past four months that the overall index has risen above growth neutral.

“Federal agriculture crop support payments and somewhat higher grain prices have boosted the Rural Mainstreet Index slightly above growth neutral for the month. Even so, almost three of four bank CEOs, or 73%, reported continuing negative impacts from the trade war,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

But as stated by Jim Stanosheck, CEO of State Bank in Odell, Nebraska, “What is happening in the economy today is exactly what voters voted for.”

Farming and ranching: The farmland and ranchland-price index for October slumped to a weak 40.3 from September’s 43.1. This is the lowest reading since March of this year and the 71st straight month that the index has remained below growth neutral 50.0.

Jeff Bonnett, president of Havana National Bank in Havana Illinois, said, “Hopefully the true corn acres planted, and more importantly, overall yields will be made public here soon now that we are well into harvesting this year's crop. I am not sure why this is such a secret and why we do not get more accurate information based upon certification of acres planted back in July?”

The October farm equipment-sales index improved to 39.7 from September’s 35.9. This is the highest reading for the index since June of this year, but marks the 73rd month that the reading has remained below growth neutral 50.0.

Banking: Borrowing by farmers for October remained strong. The borrowing index declined to a strong 68.9 from September’s 72.2. The checking-deposit index advanced to 60.8 from September’s 54.2, while the index for certificates of deposit and other savings instruments dipped to 50.0 from 51.4 in September.

“There was little support for any significant Federal Reserve interest rates cuts among bankers with 43.2% opposing any more reductions in the next 12 months. Only 18.9% support reducing interest rates beyond the one-quarter percentage point cut expected at the end of October,” said Goss.

Hiring: The employment gauge slipped to a healthy 59.7 from 62.5 in September. 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 0.8% pace, or well below the pace of urban area growth of 1.2% for the same period. Rural areas of two Mainstreet states, 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, slumped to 36.5 from September’s 42.9, and continues to indicate a very negative economic outlook among bankers. “This is the lowest economic confidence we have recorded in two years. The trade war with China and the lack of passage of the USMCA (NAFTA’s replacement) are driving confidence and growth lower for most areas of the region,” said Goss.

Home and retail sales: The home-sales index decreased to a still solid 54.2 from September’s 57.1. The retail sales index for October fell to 47.2 from September’s 52.8.

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.

Below are the state reports:

Colorado: Colorado’s Rural Mainstreet Index (RMI) for October advanced to 55.5 from September’s 54.4. The farmland and ranchland-price index sank to 41.3 from September’s 44.1. Colorado’s hiring index for September fell to 67.8 from 70.6 in September. Over the past 12 months rural areas in Colorado have experienced job growth of 3.1% compared to a somewhat weaker, but still healthy, 2.0% for urban areas of the state.

Illinois: The October RMI for Illinois rose to 51.1 from 49.5 in September. The farmland-price index slumped to 40.1 from September’s 42.8. The state’s new-hiring index slipped to 56.0 from last month’s 57.5. Over the past 12 months rural areas in Illinois have experienced job gains of 1.3% compared to a somewhat weaker 1.0% for urban areas of the state. Jim Eckert, president of Anchor State Bank in Anchor said, “Harvest has just begun in our area. Corn yields are lower than 2018 by at least 10%. The first soybeans harvested have yielded 20-25% less than last year.”

Iowa: The October RMI for Iowa increased to 49.6 from September’s 48.7. Iowa’s farmland-price index fell to 39.7 from September’s 47.4. Iowa’s new-hiring index for October declined to 52.1 from 55.5 in October. Over the past 12 months rural areas in Iowa have experienced job additions with a gain of 0.3% compared to a much stronger increase of 1.0% for urban areas of the state.

Kansas: The Kansas RMI for October improved to 51.5 from 49.7 in September. The state’s farmland-price index sank to 40.2 from September’s 42.9. The new-hiring index for Kansas slipped to 57.0 from 58.1 in September. Over the past 12 months rural areas in Kansas have experienced job additions of 1.1% compared to a stronger 1.6% for urban areas of the state.

Minnesota: The October RMI for Minnesota advanced to 52.7 from September’s 51.2. Minnesota’s farmland-price index slumped to 40.5 from 48.3 in September. The new-hiring index for October climbed to 60.1 from September’s 53.2. Over the past 12 months rural areas in Minnesota have experienced job growth of 1.6% compared to a significantly weaker 0.1% for urban areas of the state. Brian Nicklason, CEO of Woodland Bank in Grand Rapids said, “The early cold snap along with low real estate listings should dampen our economic outlook over the next few months in North Central Minnesota.”

Missouri: The October RMI for Missouri dropped to 44.7 from 45.4 in September. The farmland-price index sank to 39.2 from September’s 41.7. Missouri’s new-hiring index for October slipped to 46.3 from September’s 46.7. Over the past 12 months rural areas in Missouri have experienced job losses with job reductions of minus 1.3% compared to a much stronger gain of 1.5% for urban areas of the state.

Nebraska: The Nebraska RMI for October rose to 48.5 from September’s 47.6. The state’s farmland-price index increased to 44.6 from last month’s 42.3. Nebraska’s new-hiring index increased to 49.1 from September’s 45.2. Over the past 12 months rural areas in Nebraska have lost jobs at a rate of minus 1.1% compared to a gain of 1.8% for urban areas of the state.

North Dakota: The North Dakota RMI for October expanded to 51.6 from September’s 50.6. The state’s farmland-price index sank to 40.3 from 46.4 in September. The state’s new-hiring index dipped to 57.7 from 60.5 in September. Over the past 12 months rural areas in North Dakota have experienced job growth of 1.7% compared to 0.5% for urban areas of the state.

South Dakota: The October RMI for South Dakota moved above growth neutral for the month, expanding to 54.3 from September’s 52.9. The state’s farmland-price index dipped 40.9 from September’s 42.9. South Dakota’s new-hiring index slipped to a very strong 64.5 from September’s 66.5. Over the past 12 months rural areas in South Dakota have experienced job growth of 1.9% compared to 2.4% for urban areas of the state.

Wyoming: The October RMI for Wyoming advanced to 53.3 from September’s 52.4. The October farmland and ranchland-price index sank to 40.7 from September’s 43.6. Wyoming’s new-hiring index fell to 61.8 from 65.3 in September. Over the past 12 months rural areas in Wyoming have experienced job growth of 1.3% compared to a stronger 1.9% for urban areas of the state.

Tables 1 and 2 summarize the survey findings. Next month’s survey results will be released on the third Thursday of the month, Nov.21.