The Rural Mainstreet Index for June expanded above the growth-neutral threshold for a third straight month to its highest level since May 2022. That is after the monthly survey of bank CEO’s in rural areas declined below growth neutral in March.
The overall reading in June climbed to 56.9, up from last month’s 55.8. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“After negative growth during the first quarter of this year, the Rural Mainstreet economy experienced positive, but slow, economic growth for all of the second quarter. Only 3.4% of bankers reported a downturn in economic conditions for the month,” said Dr. Ernie Goss, an economist at Creighton University in Omaha, Nebraska.
The farmland price index rose to 59.3 in June from 56.3 in May. This was the 33rd straight month that the index has advanced above 50.0. However, the farm equipment sales index fell below neutral to 48.3, from 50.2 in May. Farm equipment sales declined for only the third time in the past 31 months. “Higher borrowing costs have begun to negatively impact purchases of farm equipment,” said Goss.
Bank CEOs ranked a series of interest rate hikes by the Federal Reserve as the greatest challenge in the 12 months ahead, with rising bank regulations ranked a distant second.
“Bankers continue to have a very positive outlook for the payment of farm loans with an estimated loan default rate rising less than 1% over the next 12 months,” said Goss. “Higher short-term interest rates produced by Federal Reserve rate hikes over the past year have posed a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have risen little over the same time period.”
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