Federal crop support payments tied to the continuing trade war with China and higher corn and soybean prices boosted Creighton University’s Rural Mainstreet Index in November to the highest level this year.
The index, compiled from a monthly survey of rural bankers in Iowa and nine other Midwest states, rose to 54.2, from 51.4, in October.
A reading of 50 is considered growth neutral, indicating neither a rising or declining economy.
Although still tepid, the November reading marked the fourth time in the last five months that the overall index rose above 50.
“Given a continued weak rural economy, bank chief executive officers, on average, expect holiday buying to increase by only 1.3 percent above last year’s levels,” said Ernie Goss, the Creighton University professor who supervises and compiles the Rural Mainstreet Index survey.
Iowa’s Rural Mainstreet Index increased to 52.5 in November from October’s 49.6.
Iowa’s farmland price index was unchanged from October’s 39.7. The state’s new-hiring index for November advanced to 57.1 from October’s 52.1.
Over the past year, rural areas in Iowa have experienced job additions with a gain of 0.2 percent, compared with a stronger 0.9 percent for urban areas of the state.
The region’s overall confidence index, which reflects bank CEO expectations for the economy six months out, increased to a still weak 44.4 from October’s 36.5, and continues to indicate a very negative economic outlook among bankers in the region.
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“The trade war with China and the lack of passage of the United States-Mexico-Canada Agreement. (NAFTA’s replacement) are driving confidence and the economic outlook lower for most areas of the region,” Goss said.
Bankers responding to the survey said early harvest data is not encouraging.
“The latest harvests are showing significant declines in test weights leading to the point that 2019 harvest production looks to be running below average,” said Jeff Bonnett, president of Havana National Bank in Havana, Ill.
Borrowing by farmers weakened significantly in November. The borrowing index slumped to 51.4 from October’s very strong 68.9 and 60.1 in November 2018.
Bankers reported that approximately 16.7 percent of farmers and 5.5 percent of business owners in their area had no organization succession plan.
Each month, community bank presidents and CEOs in non-urban agriculturally and energy-dependent portions of Iowa and nine other Midwest states are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road.