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Rural Mainstreet Index Remains in Solid Growth Territory
North Dakota Ag Connection - 06/18/2021

For the seventh straight month, the Creighton University Rural Mainstreet Index (RMI) remained 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 for June fell to still strong 70.0 from May's record high of 78.8. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

Approximately, 46.7% of bank CEOs reported that their local economy expanded between May and June.

"Strong grain prices, the Federal Reserve's record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural economic activity remains below pre-pandemic levels," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

However, several bankers raised future concerns. Steve Simon CEO of South Story Bank and Trust in Huxley, Iowa, reported, "Continued dry conditions will start to have an effect on markets and crops soon"

Bankers were asked to name the greatest threat to 2021-22 bank operations. Approximately one-fourth identified a downturn in farm income, and an equal one-in-four named rising government regulation as the greatest threats.

Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, named another concern stating that, "In my view, $29,000,000,000,000 in total debt with no real plan to reduce that debt, or balance the annual budget is the biggest threat to our economy's success."

He argues that neither political party, nor the Federal Reserve, has engaged in a serious discussion to solve the problem.

Farming and ranching: For a ninth straight month, the farmland price index advanced significantly above growth neutral. The June reading slipped to a very strong 75.9 from May's 78.1. This is first time since 2013 that Creighton's survey has recorded nine straight months of farmland prices above growth neutral.

The June farm equipment-sales index rose to 71.6 from 67.9, its highest level since 2012, and up from May's 67.9. After 86 straight months of readings below growth neutral, farm equipment sales bounced into growth territory for the last seven months. This is the best growth in this index since 2012.

Banking: The June loan volume index declined to 54.9 from May's 59.0. The checking-deposit index fell to a very solid 70.0 from May's 87.9, while the index for certificates of deposit, and other savings instruments, slumped to 35.0 from 43.9 in May.

More than half, or 53.3% of the bank CEOs judge the current uptick in the consumer price index (CPI) a. Only 30% expect the increase to be transitory.

More than three-fourths of the bankers think the Federal Reserve should begin raising interest rates before the end of 2021.

Hiring: The new hiring index slipped to 71.7 from 72.7 in May. Despite recent solid job gains for the region, data from the U.S. Bureau of Labor Statistics indicate that nonfarm employment levels for the Rural Mainstreet economy are down by almost 89,000 (nonseasonally adjusted), or 2%, compared to pre-COVID-19 levels.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, decreased to 71.7 from May's 78.8. "Federal stimulus checks, strong grain prices, and advancing exports have supported a healthy confidence number," said Goss.

Home and retail sales: The home-sales index declined to 78.3 from May's record high 83.3. The retail-sales index for June dipped to a robust 70.0 from 71.2 in May. "The federal stimulus checks are having a very positive impact on Rural Mainstreet retail sales," said 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.

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 and launched in January 2006.

The North Dakota RMI for June climbed to 56.7 from May's 53.8. The state's farmland-price index sank to 69.2 from 72.0 in May. The state's new-hiring index was unchanged from May at 65.0. Despite recent solid job gains, U.S. Bureau of Labor Statistics data indicate that North Dakota's Rural Mainstreet nonfarm employment remains more than 13.200 jobs, or 8.2%, below its pre-COVID-19 level.


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