May 22, 2017
Source: Creighton University Rural Mainstreet Index
May Survey Results at a Glance:
* The overall index rose to highest level since July 2015.
* Almost one in four bank CEOs said the Federal Reserve should raise short-term interest rates at June meetings.
* Agriculture equipment-sales index jumped to its highest level in more than two years.
* Approximately 28.9 percent of bankers named rising regulatory costs as the biggest challenge to banking operations over the next 5 years.
* Approximately 11.1 percent of bankers reported farm foreclosures represented the greatest risk to banking operations, more than double the 4.5 percent who identified such foreclosures as the greatest risk in May 2016 survey.
OMAHA, Neb. (May 18, 2017) - After dropping below growth neutral for 20 straight months, the Creighton University Rural Mainstreet Index moved above the 50.0 threshold for May 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 index, which ranges between 0 and 100, climbed to 50.1 from 44.6 in April. May's reading was the highest recorded reading since July 2015. The last time the overall index was at or above growth neutral was August 2015.
"Stabilizing and slightly improving farm commodity prices helped push the overall index into a weak but above growth neutral for May," said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business. "The U.S. Department of Agriculture is projecting that net U.S. farm income will sink by 8.7 percent to $62.3 billion for 2017, the fourth consecutive year of declines after reaching a record high in 2013. This downward trend has weighted on our survey results for almost two years."
This month, and in May 2016, bank CEOs were asked to name the biggest economic challenge to their banking operations over the next five years. The largest share of bankers, or 28.9 percent, named rising regulatory costs as the top challenge or risk. This is almost the same percent as 2016. More than one in five, or 26.7 percent, detailed government subsidized competition from Farm Credit and credit unions as the greatest challenge, or almost double the 13.6 percent reported in May 2016.
More than one of 10 bankers, or 11.1 percent, reported that farm foreclosures represented the greatest risk to banking operations for the next five years, or more than double the 4.5 percent of bankers who identified such foreclosures as the greatest risk last year at this time.
In terms of risk to the rural economy, almost nine of 10 bankers, or 86.7 percent, think low agriculture commodity prices are the greatest threat to the rural economy. This is down slightly from the 90.9 percent who detailed the same risk in May 2016.
Farming and ranching: The farmland and ranchland-price index for May rose to 36.4 from April's frail 30.7. This is the 42nd straight month the index has languished below growth neutral 50.0, but is the highest recorded reading since September 2016.
The May farm equipment-sales index increased to 26.8 from 21.5 in April. This marks the 45th consecutive month the reading has fallen below growth neutral 50.0, and is the highest recorded reading since January 2015.
Banking: Borrowing by farmers was very strong for May as the loan-volume index fell to a strong 74.5 from last month's record 81.6. The checking-deposit index slumped to 48.9 from 52.2 in April, while the index for certificates of deposit and other savings instruments rose to 46.6 from 44.5in April.
Almost one in four bank CEOs, or 24.5 percent, said the Federal Reserve should increase short-term interest rates at its next meeting on June 14. On the other hand, approximately 22.2 percent want the Fed to keep rates at current levels.
Jeffrey Gerhart, president and chairman of the Bank of Newman Grove in Nebraska and former Chairman of the Independent Community Bankers of America, said "The Federal Reserve needs to raise interest rates. They've been too low far too long."
Hiring: The job gauge advanced to 60.1 from April's 57.8. Rural Mainstreet businesses not linked to agriculture increased hiring for the month at a solid pace.
Confidence: The confidence index, which reflects expectations for the economy six months out, expanded to a weak 46.6 from 45.6 in April indicating a continued pessimistic outlook among bankers. "Until agricultural commodity prices begin to trend higher, I expect banker's economic outlook to remain weak," said Goss.
Home and retail sales: Home sales moved higher for the Rural Mainstreet economy for May with a reading of 63.6 compared to April's 56.8. The May retail-sales index increased to 48.9 from April's 40.2. "Much like their urban counterparts, Rural Mainstreet retailers are experiencing weak sales," reported 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. The survey is supported by a grant from Security State Bank in Ansley, Neb.
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.