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Over 3 of 5 Bankers Report Negatives From Trade Skirmishes
USAgNet - 07/23/2018

The Creighton University Rural Mainstreet Index climbed above growth neutral in July for a sixth straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy. This is the first time since the July 2014 survey that the overall index has risen above growth neutral for six straight months.

The overall index slid to 53.8 from 56.1 in June. The index ranges between 0 and 100 with 50.0 representing growth neutral.

"Surveys over the past several months indicate the Rural Mainstreet economy is solid but with less positive economic growth. However, the negative impacts of recent trade skirmishes have begun to surface with the weakening of already anemic grain prices," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business, Omaha, Neb.

Pete Haddeland, CEO of the First National Bank in Mahnomen, Minn., said, "Grain prices are at, in some cases, 10-year lows. Not good."

According to Fritz Kuhlmeier, CEO of Citizens State Bank in Lena, Ill., "The trade issues/tariffs have been devastating on our local dairy industry when tacked on top of already below cost or breakeven milk prices."

The farmland and ranchland-price index for June rose to a weak 44.7 from June's 42.7. This is the 56th straight month the index has fallen below growth neutral 50.0.

The July farm equipment-sales index increased to 38.8 from June's 36.3. This marks the 59th consecutive month the reading has moved below growth neutral 50.0.

Many bankers reported good, or above average rainfall, with crop production off to a good start. Furthermore, in portions of the region, the recreation industry was boosting the economy.

Banking: Borrowing by farmers expanded for July as the loan-volume index rose slightly to 76.9 from 76.3 in June. The checking-deposit index slumped to 37.8 from June's 41.7, while the index for certificates of deposit and other savings instruments slid to 43.9 from 47.6 in June.

This month bankers were asked, "How many times should the Federal Reserve raise interest rates for the rest of 2018?"

"Almost one-third, or 30 percent of bank CEOs recommended keeping rates at their current level, 45 percent suggested one additional interest rate increase, 20 percent supported two additional rate hikes and 5 percent recommended three more rate increases for 2018," said Goss.

Hiring: The employment gauge improved to a very strong 65.6 from June's 58.0. The Rural Mainstreet economy is now experiencing positive job growth.

Confidence: The confidence index, which reflects expectations for the economy six months out, sank to 42.7 from June's 48.8, indicating plummeting economic optimism among bankers. "Just as last month, an unresolved North America Free Trade Agreement (NAFTA) and rising trade tensions/tariffs with China continue to be a concern," said Goss.

Bankers were asked to gauge the impact of current rising trade skirmishes and tariffs. More than three of five, or 78 percent, reported that these actions have had a negative impact on their local economy. Approximately 75.6 percent reported negative impacts on grain farmers.

Home and retail sales: The home-sales index soared to its highest level in almost three years to 65.9 from 60.7 for June. Retail sales improved for the month to 51.2 from June's 47.6.

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.

This survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.

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