A key gauge of rural America’s financial health has fallen to its lowest level in almost two years.
The Rural Mainstreet Index for August slumped to 46.5, its lowest reading since 45.3 in October 2017.
The index, a real-time analysis of the rural economy in 10 states, is based on a survey of bank CEOs in some 200 rural communities with an average population of 1,300. Any score above 50 suggests growth, while a score below 50 indicates a shrinking economy.
Global trade tensions are the main reason for the lower score, the bankers said.
“The trade war with China and the lack of passage of the United States-Mexico-Canada Agreement (NAFTA’s replacement) are driving growth lower for areas of the region with close ties to agriculture,” said Ernie Goss, economics professor at Creighton University’s Heider College of Business, which produces the index.
While three out of four bankers said trade skirmishes are having a negative impact on their local economies, seven out of 10 support continuing or even raising tariffs on imported Chinese goods.
Jeffrey Gerhart, CEO of the Bank of Newman in Newman Grove, Nebraska, acknowledged that “trade wars have been and will continue to be a drain on our ag economy.”
The survey’s confidence index, which reflects bank CEO expectations for the economy six months out, fell to 40.0 from July’s 51.5. That is also the lowest level since October 2017, when it scored 37.0.
Measures of home and retail sales among farmers also were also down. The home-sales index decreased to a “still solid” 57.7 from July’s 67.6, according to the report. Retail sales in August dropped to 45.0 from July’s 47.1.
“It appears that the region experienced a significant slump in retail sales from June’s solid sales index of 58.1,” said Goss.
The latest decline in rural America’s financial health comes as the Department of Agriculture plans to release aid to help farmers hurt by the trade battle and this spring’s floods.
“Despite a $16 billion federal government support package coming soon, a drop in farm income is negatively affecting the rural Main Street economy,” said Goss.