The rural economy continues to wither due to floods, tariffs and trade pressures, according to a monthly assessment.
The Rural Mainstreet survey’s confidence index, which reflects bank CEO expectations for the economy six months out, sank to its lowest level in almost two years—38.2 in May. That’s down from 50.9 in April.
“March floods, recently announced tariffs and anemic farm income negatively influenced the economic outlook of bank CEOs,” said Ernie Goss, economics professor at Creighton University’s Heider College of Business, which produces the index.
Another positive streak ended this month when the overall index dropped to 48.5 from 50.0 in April—marking the first time since November 2018 that it’s fallen below growth-neutral.
The Mainstreet index provides a real-time analysis of the rural economy 10 states. It surveys 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.
Weak farm income has led to restrictions on bank loans to farmers. More than 40 percent of bank CEOs are rejecting farm loans, and nearly two-thirds are increasing loan collateral requirements. And more than one-third are raising interest rates on loans, according to the survey.
While the expanding U.S. economy is supporting livestock producers in the region, said Goss, “trade tensions and tariffs are hammering the farming economy. Grain farmers throughout the region continue to experience losses produced by trade issues and plentiful global supplies. For May, according to bankers, the negatives far outweighed the positives.”