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Rural Mainstreet Slows: 10 Percent of CEOs Support Infrastructure Bill
South Dakota Ag Connection - 08/20/2021

For the ninth 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 August fell slightly to 65.3 from July's 65.6. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

Approximately, 34.4% of bank CEOs reported that their local economy expanded between July and August.

"Solid grain prices, the Federal Reserve's record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. USDA data show that 2021 year-to-date agriculture exports are more than 25% above that for the same period in 2020. This has been a prime factor supporting the Rural Mainstreet economy," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Farming and ranching: For an 11th straight month, the farmland price index advanced significantly above growth neutral. The August reading expanded to 76.6 from July's 71.0. This is the first time since 2012-2013 that Creighton's survey has recorded 11 straight months of farmland prices above growth neutral.

Approximately 15.6% of bankers reported that continuing drought conditions were the greatest threat to their banking operations over the next 12 months.

The August farm equipment-sales index declined to 64.7 from 67.2 in July. Readings over the last several months represent the strongest consistent growth since 2012.

Banking: The August loan volume index was unchanged from July's 53.0. The checking-deposit index rose to 68.8 from July's 67.7, while the index for certificates of deposit, and other savings instruments increased to 34.4 from 32.3 in July.

Due to strong farm finances, 40.6% of bank CEOs see low loan demand as their bank's greatest challenge over the next 12 months.

Almost one third, or 31.3%, of bankers support immediately beginning the reduction (taper) of Federal Reserve buying of U.S. Treasury bonds and mortgage-backed securities. Another 25% think the Fed should begin the reduction or taper in the fourth quarter of 2021.

Hiring: The new hiring index rose to 70.3 from 67.6 in July. However, labor shortages continue to be a significant issue for Rural Mainstreet businesses.

Shawn Davis, CEO of CNB Bank & Trust in Carlinville, Illinois, said, "(There are) too many open jobs looking for employees. Several local restaurants closed due to no workers".

"Even with labor shortages restraining growth, the region has recaptured the jobs lost to COVID-19," said Goss.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, decreased for a third straight month to 59.7 from July's 65.6.

"Rising COVID-19 infections, the turmoil in Afghanistan, and negative views of current infrastructure bills before Congress damaged the economic outlook of bank CEOs. Only 9.4% of bankers support passage of the $3.5 trillion infrastructure bill currently winding through Congress," said Goss.

Three of four bankers encourage Congress to reject the $3.5 trillion infrastructure bill due to its unnecessary spending.

Home and retail sales: The home-sales index soared to a record high 84.4 from July's 77.4. The retail-sales index for August dropped to 54.7 from July's stout 64.1. "Healthy farm prices and federal spending are having very positive impacts 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 August RMI for South Dakota strengthened to 74.4 from July's 69.8. The state's farmland-price index improved to 74.7 from 73.1 in July. South Dakota's August hiring index dropped to 69.5 from 74.6 in July. U.S. Bureau of Labor Statistics data indicate that South Dakota's Rural Mainstreet nonfarm employment has expanded by 5.9% over the past 12 months.

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