Rural Economy Posts Growth for 15 Straight Months

For 15 straight months, the rural economy has posted healthy and consistent growth. That’s according to the January Rural Mainstreet Index (RMI) from Creighton University.

For February 2021, the RMI sits at 61.5. That is up from January’s 61.1. The index ranges between 0 and 100 with a reading of 50 representing growth neutral and is generated by a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

“Strong grain prices, the Federal Reserve’s record-low short-term interest rates, and growing agricultural exports have underpinned the Rural Mainstreet Economy,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI.

This month, bankers were asked to project corn and soybean prices out six months. On average, bank CEOs expect corn prices per bushel to fall by 2.6% and soybean prices per bushel to drop by 2.3% over the next six months.    

The region’s farmland price index decreased to a very strong 78.8 from January’s 88.5 and December’s record high of 90. February’s reading represented the 17th straight month the index has moved above growth neutral.   

The February farm equipment-sales index slipped to a healthy 72 from 72.4 in January. This is the 15th straight month that the index has advanced above growth neutral. Readings over the past several months are the strongest string of monthly readings recorded since Spring 2011.

On average, bank CEOs expect the Federal Reserve to raise short-term interest rates in 2022 by one percentage point which is up from 0.70% (70 basis points) recorded last month. Approximately one in five bankers, or 19.2%, project more than four rate hikes of one-quarter percentage point in 2022.

“Hopefully the Fed will do three or four (based on what is warranted) 25 basis point hikes starting in March and not 50 in March,” shared Jeff Bonnett, president at Havana National Bank in Havana, Ill. 

Bonnett said the Fed should start slow and evaluate the impacts as they are implemented and not be saddled with a fixed plan.  

After moving higher for two straight months, the confidence index, which reflects bank CEO expectations for the economy six months out, sank to a weak 51.9 from January’s healthy reading of 61.1.

The RMI, which started in 2005, represents an early snapshot of the economy of rural agricultural and energy-dependent portions of the nation. It focuses on 200 rural communities with an average population of 1,300.