Down, Down, Down: Rural Bankers Economic Confidence Sinks

The COVID-19 pandemic continues to cause economic pain and pessimism in rural America. The Rural Mainstreet Index sits at 12.5 for May 2020. ( AgWeb )

The COVID-19 pandemic continues to cause economic pain and pessimism in rural America. The Rural Mainstreet Index (RMI), a monthly survey of bank CEOs in a 10-state Midwest region, sits at 12.5 for May 2020.

May’s index represents the third straight month with close to record lows. In April, the RMI hit its lowest-ever reading – 12.1. 

In March, the RMI was at 35.5, and February’s RMI was at 51.6, which posted the sixth straight month of economic growth. The index ranges between 0 and 100, with 50 representing growth neutral. 

“Since this time last year, livestock and grain prices have sunk by 19.1% and 4.7%, respectively,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “Accordingly, 73% of bankers reported restructuring farm loans. As a result of the restructuring bank CEOs expect farm loan defaults to expand by only 5.4% in the next 12 months.”

Farmland prices continue to slide. May’s reading fell to 39.7 from April’s 40.9. This is the 77th time in the past 78 months the index has been below growth neutral.

The May farm equipment-sales index increased slightly to 21.9 from 20 in April. This marks the 80th month straight month that the reading has remained below growth neutral 50.0.  

Bankers provided their assessments of the federal Paycheck Protection Plan (PPP). More than one of five bank CEOs support PPP expansion.

“Our farmers are taking the brunt of this and those with a negative Schedule F and no W-3 got no help from the PPP,” reports Lonnie Clark, president of the State Bank of Chandler in Chandler, Minn.

“I think the community banks in the Midwest should be very proud of the number of small businesses we helped in the PPP program,” adds James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa. 

The confidence index, which reflects bank CEO expectations for the economy six months out, sank to 22.1 from April’s 27.4. Weak agriculture commodity prices, and layoffs have decimated economic confidence among bankers.

This RMI, which started in 2005, represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. It focuses on 200 rural communities with an average population of 1,300. 


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Meet the man behind the Rural Mainstreet Index: Ernie Goss.