Bankers are expecting more farmers to default on their loans because of the weak rural economy, a monthly economic assessment found.
More than one in four bank CEOs reported rising loan defaults due to farmers’ financial woes, according to the Rural Mainstreet Index for June.
In addition, almost half of bankers reported in the monthly survey that farmers in their area have sold or left their farms because of money problems.
At the same time, the overall index climbed to 53.2 in June from 48.5 in May, the sixth time in the past seven months that the index has been above growth-neutral. The index, which provides 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 a growing economy, while a score below 50 indicates a shrinking economy.
“Higher agriculture commodity prices and rebuilding from recent floods boosted the Rural Mainstreet Index for the month,” said Ernie Goss, economics professor at Creighton University’s Heider College of Business, which produces the index.
While tariff and trade war fears among bankers might have put a dent in the Mainstreet Index in the past, those attitudes have shifted, said Goss. Nearly 70% of bankers “support either raising or continuing current tariffs.”
This month’s confidence index, which reflects bank CEO expectations for the economy six months out, rose to 53.3 from May’s abysmal 38.2, “indicating a positive, but somewhat weak economic outlook among bankers,” according to the June report.
Hiring was a bright spot. That indicator climbed to 64.5 from May’s 61.8. “Despite tariffs and flooding over the past several months, Rural Mainstreet businesses continue to hire at a solid pace,” said the report.