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The nation's top news events—rising COVID-19 infections and the crisis in Afghanistan—have dampened bankers' six-month economic outlook in an August survey on the rural economy.
Overall, bankers' expectations for the economy six months out in the Rural Mainstreet Index remains positive, at 59.7. But it's the third straight month that the confidence index has fallen. July's index was 65.6.
In the monthly survey of community bank presidents and CEOs in 10 states, the index ranges from 0 to 100, with a reading of 50.0 representing growth neutral.
“Rising COVID-19 infections, the turmoil in Afghanistan, and negative views of current infrastructure bills before Congress damaged the economic outlook of bank CEOs," said Ernie Goss, a professor at Creighton University's College of Business in Omaha, Nebraska, which produces the index.
Goss noted that while Afghanistan is not a destination for U.S. agriculture commodities, the current crisis “is likely to have implications for the trade flow to other" export destinations.
In addition, the survey found that three out of four rural bankers surveyed want Congress to reject a $3.5 trillion spending bill that includes some infrastructure projects. The bill, which is still being written, would create “unnecessary spending," the bankers said.
The overall index, a real-time assessment of the rural economy, dipped to 65.3 this month from July's 65.6 while still remaining above growth neutral for the ninth consecutive month.
In addition, 34.4% of the bank CEOs surveyed reported that their local economy expanded between July and August. A “prime factor" supporting the rural economy, said Goss, is that 2021 year-to-date agriculture exports are more than 25% above the same period in 2020.
This month's new hiring index rose to 70.3 from 67.6 in July, to the point where rural businesses have recaptured jobs lost to the pandemic, said Goss.
Still, labor shortages continue to be a “significant issue" for rural businesses, and in at least one Illinois town, several restaurants shut down for lack of workers, said Shawn Davis, CEO of CNB Bank & Trust in Carlinville, Illinois.
For the 11th straight month, the farmland price index scored above growth neutral, rising to 76.6 in August from July's 71.0. However, 15.6% of bankers reported that continuing drought conditions were the greatest threat to their banking operations over the next 12 months.
This month's home-sales index soared to a record-high 84.4 from July's 77.4, while the retail-sales index for August dropped to 54.7 from July's 64.1.
“Healthy farm prices and federal spending are having very positive impacts on Rural Mainstreet retail sales," said Goss.