A monthly economic survey suggests a slowing economy in the 10-state Midwest and Plains region, and bankers fear another rate hike.
The Rural Mainstreet Survey’s overall index fell to 50.0 in August from 55.6 in July and 56.9 in June. Any value above 50 on the index, ranging from 0 to 100, indicates growth in the coming months. Values below 50 indicate a contraction. Before August, the values were above the growth-neutral value for four months in a row.
“This is the fifth consecutive month that the overall index (index) has moved at or above growth neutral. However, I expect the recent declines in growth will prompt the Federal Reserve to forego a rate hike at its next meetings on September 19 and 20,” said Ernie Goss, an economist at Creighton University who monitors the survey.
A large proportion of bankers who took part in the August survey are hoping for this result.
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“In my opinion, the Federal Reserve should take a long pause when it comes to further rate hikes. It’s time for a breather,” said Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa.
The loan volume index fell to a still strong 75.0 in August from 75.9 in July. The checking deposit index fell to 30.8 from 32.7 in July, and the index for certificates of deposit and other savings instruments fell to a strong 69.2 from 71.2 in July.
“Higher short-term interest rates resulting from the Federal Reserve’s interest rate increases over the past year continue to pose a significant threat to community banks as the cost of customer deposits rises while interest rates on bank loans have barely increased over the same period,” Goss said .
Higher interest rates, deposit outflows and a tightening regulatory environment continued to weigh on the survey’s business confidence index, which fell to a weak 38.9 from 44.4 in July.
“Over the past 12 months, the regional confidence index has fallen to levels that suggest a negative outlook,” Goss said.
The Rural Mainstreet Index is based on a survey of rural bankers in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming – states that rely on agriculture and/or energy. The focus is on approximately 200 rural communities with an average population of 1,300 people.
North Dakota’s index fell to 52.1 in August from 61.7 in July. The state’s agricultural land price index fell to 62.3 from 85.3 in July. The state’s new hiring index fell to a solid 55.5 from 60.6 in July. According to the International Trade Association, North Dakota’s agricultural exports increased from $452 million in the first half of 2022 to $454 million in the same period in 2023, a growth of 0.5%.
The full report can be found at http://www.creighton.edu/economicoutlook/mainstreeteconomy.
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