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June Rural Mainstreet Economic Index Falls Below Growth Neutral
USAgNet - 06/20/2022

The Creighton University Rural Mainstreet Index (RMI) fell from May's solid reading, sinking below growth neutral for the first time since September 2020, 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 June slumped to 49.8, its lowest level since September 2020, and down from May's 57.7. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

This month, bankers were asked their U.S. recession expectations for the next 12 months. Approximately 92.9% rate the likelihood of a U.S. recession above 50%. Only 7.1% rated a recession probability below 50%.

"Much like the nation, the growth in the Rural Mainstreet economy is slowing. Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth. Farmers and bankers are bracing for escalating interest rates -- both long-term and short-term," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Jon Schmaderer, CEO of Tri-County Bank in Stuart, Neb., reported that "fuel prices are starting to have a severe negative impact on rural Nebraska."

Farming and ranching: The region's farmland price index for June advanced to 76.8 from May's 72.0, marking the 21st straight month that the index has moved above growth neutral. Over the past several months, the Creighton survey has registered the most consistent and strongest growth in farmland prices since the survey was launched in 2006.

So far in June, Peoples Company Appraisal Team tracked 32 cropland auctions across 17 Iowa counties. In total, 4,305 acres of cropland sold in auctions for $57.8 million, or an average of $13,426 per acre.

On average in June, bank CEOs expect 2022 net farm income for grain farmers to be 12.6% above 2021 levels.

Jim Eckert, president of Anchor State Bank in Anchor, Ill., reported that "in our area all crops are planted and looking good but are behind other years due to cool weather and insufficient rains."

Farm equipment sales: The June farm equipment-sales index climbed to 71.4 from May's healthy 66.9. This was the 19th straight month that the index has advanced above growth neutral. Readings over the past several months are the strongest string of monthly readings recorded since the beginning of the survey in 2006.

Banking: The June loan volume index rose to 78.5, its highest reading since May 2019, from last month's 73.0. The checking-deposit index increased to 57.4 from May's 54.0, while the index for certificates of deposit and other savings instruments sank to 35.2 from 38.0 in May. "Escalating costs of farm inputs pushed borrowing up to its highest reading since May 2019," said Goss.

Hiring: The new hiring index fell to 57.4 from 61.5 in May. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses. Despite labor shortages, Rural Mainstreet expanded non-farm employment by 2.6% over the past 12 months. This compares to a faster 3.3% increase for urban areas of the same 10 states for the same period of time.

Confidence: Surging energy prices and rocketing agriculture input prices constrained the business confidence index to 33.9, its lowest level since May 2020. This marks the lowest back-to-back readings since the beginning of the pandemic in April and May 2020.

Home and retail sales: The home-sales index dropped to a solid 55.4 from May's 61.5. The retail-sales index for June sank to 48.2 from May's growth-neutral 50.0. "Rising energy prices and higher interest rates reduced home and retail sales on Rural Mainstreet," 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. It 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.

The RMI for Minnesota sank to a regional-low 39.3 in June from 49.4 in May. Minnesota's farmland-price index climbed to 73.8 from May's 70.7. The new-hiring index for June declined to 53.8 from May's 59.4. Over the past 12 months, Minnesota's Rural Mainstreet Economy experienced a 0.8% loss in non-farm employment while urban areas in the state gained 2.8% in non-farm employment.

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