Rural Bankers' Economic Confidence Dips to Two-Year Low
The near-term rural economy is improving slightly, according to the Rural Mainstreet Index(RMI). The monthly survey of bank CEOs in a 10-state Midwest region fell below growth neutral to its lowest level in almost two years.
For October, the RMI rose to 51.4 from September’s 50.1. The October rating, although still weak, is the highest reading since June of this year. The index ranges between 0 and 100, with 50 representing 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,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “Even so, almost three of four bank CEOs, or 73%, reported continuing negative impacts from the trade war.”
However, 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,” Goss says. “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.”
Bank CEOs across the region reported significantly lower corn and soybean yields.
“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,” says Jeff Bonnett, president of Havana National Bank in Havana, Ill. “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?”
Around 40% of rural bankers support halting Federal Reserve rate hikes over the next 12 months.
“There was little support for any significant Federal Reserve interest rate cuts among bankers with 43.2% opposing any more reductions in the next 12 months,” Goss says. “Only 18.9% support reducing interest rates beyond the one-quarter percentage point cut expected at the end of October.”
For a five-year time horizon, which of the following represents the biggest economic challenge to your banking operations and/or profitability:
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.
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, October marks the 73rd month that the reading has remained below growth neutral 50.