Mar 19, 2023

GOSS: Rural Mainstreet economy goes negative for March

Posted Mar 19, 2023 10:30 AM
Creighton Professor Ernie Goss
Creighton Professor Ernie Goss

Creighton University

March 2023 Survey Results at a Glance

路 For a After hovering around growth neutral for three straight months, the region鈥檚 overall economic reading slumped below the threshold to its lowest reading since October of last year.

路 Farmland prices have now advanced for 30 straight months.

路 After advancing by over 9% for 2022, bank CEOs expect farmland prices to expand by only 1% over the next 12 months.

路 Only 13.6% of bankers tightened credit standards for farm loans this year. 

路 Approximately 87% of bankers recommend a Federal Reserve rate hike at its next meetings, March 21-22, with almost one-third supporting a 0.50% increase.

路 Bank savings deposits rose to a record level.

OMAHA 鈥 After three straight months of readings slightly above growth neutral, the Creighton University Rural Mainstreet Index fell below the growth neutral threshold, 50.0, 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 region鈥檚 overall reading in March sank below the growth neutral threshold. The March index slumped to 45.6 from 50.1 in February. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. 

鈥淭he Rural Mainstreet economy continues to experience slow, to no, to negative economic growth. Less than 1% of bankers reported improving economic conditions for the month with 92% indicating no change in economic conditions from February鈥檚 slow growth,鈥 said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University鈥檚 Heider College of Business.

Farming and ranching: The region鈥檚 farmland price index decreased to 63.0 from February鈥檚 63.5. This was the 30th straight month that the index has advanced above 50.0. 

Across the region, farmland prices advanced by approximately 9% over the past 12 months.  However, bankers, on average, expect only 1% growth over the next 12 months.

Farm equipment sales: As a result of solid farm financial conditions, the farm equipment-sales index climbed to 59.5 from 52.1 in February. The index has risen above growth neutral for 26 of the last 28 months.

Banking: The March loan volume index rose to a strong 63.0 from 48.1 in February and was up from 61.9 in March 2022. The checking-deposit index increased to 40.9 from February鈥檚 38.5, while the index for certificates of deposit and other savings instruments expanded to a record high of 75.0  from February鈥檚 solid 57.7.

Bank CEOs were asked what interest rate action the Federal Reserve should undertake at their March 21-22 meetings. Approximately 56.5% recommended a 0.25% rate increase; 30.5% supported a 0.50% boost; and 13% advocated no rate change. However, most survey responses were completed prior to recent bank failures.  

According to Jeffrey Gerhart, former Chair of the Independent Community Bankers of America, 鈥淚t鈥檚 too bad that the Fed waited so long to raise interest rates. They could have begun raising interest rates sooner than they did and would not have had to raise them as fast as they鈥檝e done.鈥  Gerhart applauds the Fed for raising interest rates and its willingness to stay the course to get a handle on inflation.

Hiring: The new hiring index for March sank to 45.5 from 48.1 in March. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses.

Confidence: The slowing economy, higher borrowing costs and labor shortages continued to constrain the business confidence index to a weak 39.1 from 44.4 in February. 鈥淥ver the past 12 months, the regional confidence index has fallen to levels indicating a very negative outlook,鈥 said Goss.

Home and retail sales: The home-sales index sank to a very weak 36.4 from February鈥檚 37.0. 鈥淭his is the tenth straight month that the home-sales index has fallen below growth neutral. An almost doubling of the 30-year mortgage rate over the past year and low inventory levels slowed home sales in the region over that time period,鈥 said Goss.

The retail-sales index for March dropped to 41.3 from February鈥檚 50.0. 鈥淏ankers were pessimistic regarding the economic outlook with downward pressure on retail sales for the first quarter of 2023,鈥 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. The index 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.

Below are reports from Nebraska and surrounding states:

Colorado: Colorado鈥檚 Rural Mainstreet Index (RMI) for March fell to 50.3 from 60.6 in February. The farmland- and ranchland-price index advanced to 64.3 from 62.6 in February. The state鈥檚 new hiring index was 47.8 for March. USDA data for the top five exported agriculture products for Colorado indicate that for the first quarter of fiscal 2023, the state exported $496.3 million. This represented $1.01 per $1,000 of state GDP.

Kansas: The Kansas RMI for March dropped to 43.6 from February鈥檚 53.5. The state鈥檚 farmland-price index declined to 61.4 from February鈥檚 70.1. The new-hiring index for Kansas plummeted to 44.3 from 50.2 in February. USDA data for the top five exported agriculture products for Kansas indicate that for the first quarter of fiscal 2023, the state exported $942 million. This represented $4.43 per $1,000 of state GDP.

Missouri: The state鈥檚 March RMI dropped to 44.5 from 49.8 in February. The farmland-price index fell to 61.8 from February鈥檚 63.2. The state鈥檚 new hiring gauge shrank to 44.8 from 48.2 in February. USDA data for the top five exported agriculture products for Missouri indicate that for the first quarter of fiscal 2023, the state exported $477.6 million. This represented $1.22 per $1,000 of state GDP.

Nebraska: The Nebraska RMI sank below growth neutral to 48.3 from 53.1 in February. The state鈥檚 farmland-price index for March decreased to 63.4 from February鈥檚 64.6.  Nebraska鈥檚 March new-hiring index slumped to 46.8 from 49.9 in February. USDA data for the top five exported agriculture products for Nebraska indicate that for the first quarter of fiscal 2023, the state exported $868.8 million. This represented $5.30 per $1,000 of state GDP.

South Dakota: The March RMI for South Dakota increased to 47.2 from 44.8 in February. The state鈥檚 farmland-price index decreased to 58.8 from February鈥檚 59.6. South Dakota鈥檚 March new hiring index fell to 41.0 from 43.7 in February. USDA data for the top five exported agriculture products for South Dakota indicate that for the first quarter of fiscal 2023, the state exported $355.4 million. This represented $5.20 per $1,000 of state GDP.

Wyoming: The March RMI for Wyoming slumped to 41.7 from 42.8 in February. The March farmland- and ranchland-price index increased to 60.6 from 60.2 in February. Wyoming鈥檚 new-hiring index sank to 43.3 from February鈥檚 44.5. USDA data for the top five exported agriculture products for Wyoming indicate that for the first quarter of fiscal 2023, the state exported $700 thousand. This represented $0.01 per $1,000 of state GDP.