A monthly assessment of the rural economy made history this month when its overall index hit an all-time low as rural bankers predicted a recession amid the COVID-19 pandemic.
Rural Mainstreet Index plummeted to 12.1, compared to 35.5 in March, the largest one-month drop since the survey began in January 2006. Any score above 50 suggests a growing economy, while a score below 50 indicates a shrinking economy.
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.
More than nine of 10 bank CEOs expect recessions in their local areas as a result of the pandemic’s economic fallout.
“This is up significantly from March when 61.3 percent of bankers anticipated such a recession,” said Ernie Goss, a professor at Creighton University’s College of Business in Nebraska, which produces the index.
Nearly a third of bankers surveyed reported higher loan delinquency rates.
“Low commodity prices and [the coronavirus] are major concerns,” said Jim Eckert, president of Anchor State Bank in Anchor, Illinois. “The economy will suffer for a long time due to the shutdown” of large and small businesses.
The survey’s confidence index, which reflects bank CEO expectations for the economy six months out, dipped to 27.4 from 28.3 in March. Last month’s reading was the largest one-month drop after February’s favorable 58.1.
This month’s survey also asked bankers about their experiences with new federal relief programs under the Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law in March.
Bank CEOs reported mixed results administering the Paycheck Protection Program (PPP), a $350 billion loan program to help small businesses keep paying their workers. Almost half said the program was “too confusing” for borrowers and said loan volume and technical issues were contributing factors. The loan program has already run out of money, and Congress is working to provide more funds.