A monthly economic survey of rural Midwest bankers reached its highest level this month since June 2018, despite expectations for a further decline in farm equipment sales and borrowing in 2020.
The Creighton University Rural Mainstreet Index rose to 55.9 for January, up from 50.2 in December. It was the 11th time in the past 12 months that the index has been above the 50.0 growth-neutral mark. The index is based on a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and energy.
Although fewer Midwest banks reported that their local economy was in an economic downturn compared with a year ago — 22.9% currently versus 17.7% — bankers also said they expect farm equipment sales to decline by an additional 4.2% this year.
At the same time, the index’s employment gauge advanced to a “very healthy” 61.8 from December’s 60.0. Despite the trade war and weaker manufacturing in rural areas, Rural Mainstreet businesses are now hiring at a solid pace, Creighton economist Ernie Goss said. Over the past 12 months, the Rural Mainstreet economy added jobs at a 0.4% pace, well below the rate of urban-area growth of 1.% for the same period.
For Iowa, the January Rural Mainstreet Index increased to 56.1 from December’s 53.5. Iowa’s farmland-price index slumped to 45.3 from December’s 52.5. Iowa’s new-hiring index for January advanced to 57.2 from December’s 48.7.
Iowa’s employment growth is weaker than the region as a whole, however. Over the past 12 months rural areas in Iowa have experienced job losses, with employment growth at minus 0.6%, compared with a stronger 1.1% for urban areas of the state.
Looking at overall numbers for the 10-state region, the January farm equipment-sales index increased to a weak 35.0 from December’s 27.9, marking the 76th month that the reading has remained below growth-neutral.
Additionally, borrowing by farmers weakened again in January. The borrowing index declined to 48.5, its lowest level since February 2013, from December’s 50.0. Farm loans fell to their lowest level in almost seven years.
Bankers’ confidence index, which reflects bank CEO expectations for the economy six months out, increased to a still weak 50.0 from 45.8 in December. The index continues to indicate a negative economic outlook among bankers.
"Creighton's January survey was conducted before the signing of the Phase 1 trade agreement with China and the Senate passage of USMCA,” Goss said in a statement. “I expect the passage of USMCA and the Jan. 15 trade agreement with China will boost business confidence in the months ahead.”