April Rural Mainstreet Index Collapses to Record Low

The Creighton University Rural Mainstreet Index (RMI) plummeted in April to its lowest level since beginning the survey in January 2006. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, this represented the second straight record low with a reading well below growth neutral.

Overall: The overall index for April slumped to 12.1 from 35.5 in March. April’s decline represents the largest one month fall since the survey was initiated in January 2006.

“More than nine of 10 bank CEOs expect the coronavirus to produce a recession in their market area. This is up significantly from March when 61.3 percent of bankers anticipated such a recession,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Jim Eckert, president of Anchor State Bank in Anchor, Illinois, reported, “Low commodity prices and the Wuhan Chinese virus are major concerns. The economy will suffer for a long time due to the shutdown.”

Approximately 94%, of bankers reported a decline in client or customer visits over the past two weeks as a result of the coronavirus. Almost one-third, or 30.3%, indicated that their bank had experienced higher loan delinquency rates resulting from the coronavirus threat over the same two-week period.

Farming and ranching: Farmland prices continue to slide. April’s reading fell to 40.9 from March’s 46.6. This is the 76th time in the past 77 months the index has been below growth neutral.

The April farm equipment-sales index dropped to 20.0 from 37.5 in March. This marks the 79th month straight month that the reading has remained below growth neutral 50.0.

Banking: Borrowing by farmers expanded for April. The borrowing index rose to 75.8 from March’s 66.1. The checking-deposit index declined to 65.6 from March’s 69.4, while the index for certificates of deposit and other savings instruments increased to 48.4 from 45.2 in March.

This month bankers were asked assess the Payer Protection Plan (PPP). Almost one-half, or 45.5%, reported that PPP was too confusing for borrowers.

However, James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa reported, “Our experience is very positive. There are virtually no difficulties for customers to apply. Our biggest problem is getting on-line quickly with SBA.”

Todd Douglas, CEO of the First National Bank in Pierre, South Dakota, said, “As of April 10, 2020 we have approval for 949 loans totaling over $120 million in the PPP program. We still have many pending to work through.”

Don Vogel, CEO of Farmers National Bank in Prophetstown, Illinois, reported that his bank had continued with increased number of refinancing’s due to low rates, and now large number of SBA program loan requests.

Hiring: The employment gauge fell to 9.4, a record low, and down from 48.3 in March. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for the nine-state region, urban plus rural, were 1,226,370 which was a 29-fold expansion from the same period in 2019,” said Goss.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, sank to 27.4 from March’s 28.3. This decline follows March’s reading which represented the greatest one month decline in the confidence reading since the survey was initiated.

Home and retail sales: The home-sales index tumbled to 35.9 from March’s healthy 56.5. The retail -sales index for April plummeted to a record low 4.5 from March’s weak 37.1. U.S. March retail sales suffered their biggest one month decline in three decades. “Creighton’s regional retail sales number suggests that U.S. retail sales will move even lower for April,” said Goss.

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.

Below are the state reports:

Colorado: Colorado’s Rural Mainstreet Index (RMI) for April fell to a regional high of 13.3 from March’s 37.0. The farmland and ranchland-price index sank to 40.9 from 46.7 in March. Colorado’s hiring index for April tumbled to 12.5 from March’s 51.6. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for the state were 107,332 which was a 31-fold expansion from the same period in 2019,” said Goss.

Illinois: The April RMI for Illinois plunged to 8.9 from 32.3 in March. The farmland-price index decreased to 39.4 from March’s 45.1. The state’s new-hiring index slumped to 6.3 from last month’s 32.8. Brian Schroeder, CEO of First Farmers State Bank in Bloomington said, “In our market our deposits are growing. I have to wonder if the velocity of turnover of dollars is slowing as people shelter in place and spend less money, therefore creating an increase in deposits.” U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for the state were 379,371 which was a 21-fold expansion from the same period in 2019,” said Goss.

Iowa: The March RMI for Iowa fell to a regional low 7.1 from March’s 31.0. Iowa’s farmland-price index dropped to 38.8 from March’s 44.6. Iowa’s new-hiring index for April sank to a regional low of 4.2 from February’s 47.7. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for Iowa were 123,300 which was a 32-fold expansion from the same period in 2019,” said Goss.

Kansas: The Kansas RMI for April plunged to 8.9 from March’s 32.0. The state’s farmland-price index slumped to 39.4 from 45.0 in March. The new-hiring index for Kansas wilted to 5.7 from 31.9 in March. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for the state were 104,086 which was a 36-fold expansion from the same period in 2019,” said Goss.

Minnesota: The April RMI for Minnesota dropped to 12.0 from March’s 34.9. Minnesota’s farmland-price index dipped to 40.5 from March’s 46.0. The new-hiring index for April fell to 8.2 from March’s 50.2. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for the state were 220,114 which was a 35-fold expansion from the same period in 2019,” said Goss.

Missouri: The April RMI for Missouri tumbled to 11.3 from March’s 34.4. The farmland-price index declined to 40.3 from March’s 45.8. Missouri’s new-hiring index for April slipped to 6.1 from March’s 49.2. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for the state were 186,630 which was a 34-fold expansion from the same period in 2019,” said Goss.

Nebraska: The Nebraska RMI for April tumbled to 10.1 from March’s 32.6. The state’s farmland-price index slipped to 39.8 from last month’s 45.2. Nebraska’s new-hiring index plunged to 14.5 from March’s 33.9. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks Nebraska were 51,513 which was a 41-fold expansion from the same period in 2019,” said Goss.

North Dakota: The North Dakota RMI for April slumped to 11.9 from 34.9 in March. The state’s farmland-price index declined to 40.4 from 46.0 in March. The state’s new-hiring index plummeted to 7.6 from March’s 41.7. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for the state were 27,922 which was a 48-fold expansion from the same period in 2019,” said Goss.

South Dakota: The April Rural Mainstreet Index (RMI) for South Dakota worsened to 13.2 from March’s 36.1. The state’s farmland-price index declined to 40.9 from March’s 46.3. South Dakota’s new-hiring index contracted to 12.1 from March’s 49.4. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks South Dakota were 14,717 which was a 54-fold expansion from the same period in 2019,” said Goss.

Wyoming: The April RMI for Wyoming slumped to 11.5 from March’s 35.8. The April farmland and ranchland-price index rose to 46.5 from 46.3 in March. Wyoming’s new-hiring index plunged to 6.4 from March’s 44.6. “U.S. Department of Labor’s reported initial claims for unemployment benefits for the last two weeks for the state were 11,296 which was a 11-fold expansion from the same period in 2019,” said Goss.

Tables 1 and 2 summarize the survey findings. Next month’s survey results will be released on the third Thursday of the month, May 21.

Source: Creighton University