Recent U.S. trade deals have pushed bankers’ confidence in rural America’s economic health to a seven-year high, according to a monthly assessment.
A gauge of bank CEO expectations for the rural economy six months out rose to 58.1 in February from 50.1 in January, according to Creighton University’s Rural Mainstreet Index. This month’s results, however, don’t reflect economic impacts of the coronavirus outbreak in China.
The signings of the Phase 1 trade pact with China and the United States-Mexico-Canada Agreement boosted the RMI’s confidence index “across the region with expectations of higher international sales. The last time Creighton recorded economic confidence this high was when grain prices were double today’s values in 2013,” said Ernie Goss, a professor at Creighton University’s College of Business, which produces the index.
RMI readings are based on a survey of bank CEOs in some 200 rural communities in 10 states with an average population of 1,300. Any score above 50 suggests a growing economy, while a score below 50 indicates a shrinking economy.
February’s overall index, a real-time analysis of the rural economy, remained above growth-neutral for the sixth straight month, though it declined to 51.6 from 55.9 in January. Low farm income was a factor in this month’s reading, said Goss. He noted that 40.6% of bankers restructured loans, “while only 3.1% indicated that their banks had rejected a higher percentage of farmland loans. Approximately one-fourth of bankers indicated no change in lending practices.”
February’s survey asked bankers what percentage of farmland purchases were cash sales. On average, bank CEOs reported that 17.3% of farmland purchases in February were made in cash—down from 22% five years ago.