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Rural Mainstreet Index Climbs for September
Minnesota Ag Connection - 09/18/2020

Since falling to a record low in April of this year, the Creighton University Rural Mainstreet Index (RMI) has increased for five straight months, but still remains below growth neutral.

According to the September monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, September's reading represented the seventh straight month with a reading in a recessionary economic zone despite the increases over the past few months.

Overall: The overall index for September increased to 46.9 from August's 44.7, but still well below growth neutral. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

"Recent improvements in agriculture commodity prices, federal stimuli and Federal Reserve record low interest rates have underpinned the Rural Mainstreet Economy. Bank CEOs estimated that farm income, including government support, was down only 1.5% from this time last year," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Almost one of four bankers, or 23.1%, reported that their local economies were back to pre-coronavirus levels.

Farming and ranching: After moving above growth neutral for only the second time in the past 81 months in August, the farmland price index once again fell below the threshold for September. The September reading sank to 45.0 from August's 50.0.

The September farm equipment-sales index slipped to 32.1 from 32.8 in August. This marks the 84th straight month the reading has remained below growth neutral 50.0.

Banking: Borrowing by farmers expanded for September, and at a faster pace than in August. The borrowing index expanded to 60.9 from August's 53.9. The checking-deposit index declined to 76.6 from 78.9 in August, while the index for certificates of deposit and other savings instruments slumped to 35.9 from 40.8 in August.

Hiring: Hiring for September exceeded layoffs and furloughs for the month. The new hiring index rose to 54.8 from August's 47.4. Even so, data from the U.S. Bureau of Labor Statistics indicate that nonfarm employment levels for the Rural Mainstreet economy are down by 222,000 (nonseasonally adjusted), or 5% compared to pre-COVID-19 levels. "It will take many months of above growth neutral readings to get back to pre-COVID-19 employment levels for the region," said Goss.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, improved to 50.0 from August's 44.6. "COVID-19 related farm support payments and improving gain prices have boosted confidence offsetting pessimism from the impact of the derecho in several of the survey states," said Goss.

Approximately 38.7% of bankers indicated that government support via the CARES Act and the Paycheck Protection Program were crucial to their local economy. Only 3.8% reported that these two programs had little or no impact.

Home and retail sales: The home-sales index climbed to a strong 75.0 from August's 68.9. The retail-sales index for September increased to a frail 43.8 from August's 38.2. "Higher unemployment and business closures linked to COVID-19 continue to harm the region's retailers," 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.

The September RMI for Minnesota increased slightly to 42.2 from August's 42.0. Minnesota's farmland-price index fell to 40.7 from 45.7 in August. The new-hiring index for September rose to 37.7 from August's 32.8. Compared to the same month last year, Minnesota's Rural Mainstreet economy has lost 9.4% of its nonfarm employment representing 50,000 jobs.


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