As businesses reopen, the rural economy in 10 Plains and Western states is recovering but depressed farm commodity prices are still holding down growth, according to a monthly assessment.
“Even with a slight recent rebound in prices, farm commodity prices are down by 7.3% over the last 12 months,” said Ernie Goss, a professor at Creighton University’s College of Business in Omaha, Nebraska, which produces the index. “As a result, and despite the initiation of $16 billion in USDA farm support payments, only 3% of bankers reported positive economic growth."
Rural Mainstreet Index overall for the 10-state region more than tripled to 37.9 in June from May's extremely dismal 12.5. Yet any score below 50 suggests a shrinking economy.
The Rural Mainstreet Index is a 10-state survey of community bank presidents and CEOs on current economic conditions. The bankers also provide a six-month economic outlook.
Respondents weighed in on the biggest challenges to their local economies and banks over the next 12 months. A third of bankers expect low commodity prices to be the greatest economic threat. And more than 27% indicated rising loan defaults as the biggest challenge to their banks.
With more businesses reopening as pandemic restrictions lifted, job growth exceeded layoffs in rural areas, according to the survey. The hiring index jumped to 51.5 in June from May’s 17.1, but employment remains well below pre-outbreak levels.
“Data from the U.S. Bureau of Labor Statistics indicate that employment levels for the Rural Mainstreet economy are 12% below their year-ago levels,” said Goss. “It will take many months of above-growth neutral readings to get back to pre-COVID-19 employment levels for the region.”
This month, bank CEOs were asked about the current operational status of ethanol plants in their area. Almost one-third of bankers reported current production shutdowns, either permanent or temporary.
Expectations for the economy over the next six months nearly doubled to 43.8 from May’s 22.1, according to the “confidence portion” of this month’s Rural Mainstreet Index.