After four straight months of above-growth neutral readings, the Rural Mainstreet Index (RMI) slumped to growth neutral, 50, in August.
The index measures rural economic conditions in 10 Midwest states, focusing on approximately 200 rural communities with an average population of 1,300.
Farmland cash rents in the 10 states are expected to expand by 1.3% over the next year, according to a news release.
Less than one-third of bank CEOs expect a “soft landing” for the economy, according to the release. Approximately one-third anticipate a “hard landing,” or negative growth from Federal Reserve rate hikes.
Bankers reported continuing record-low deposits.
Only 14.8% expect a stronger farm economy one year out. Almost half, or 48.2%, forecast a weaker farm economy 12 months out, according to the release.
“This is the fifth consecutive month that the overall RMI has moved at or above growth neutral. However, I expect recent pullbacks in growth to push the Federal Reserve to forgo an interest rate increase at its next meetings on Sept. 19-20,” said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
A large share of bankers support a cessation of rate increases, Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, said in the release.
“In my view, the Federal Reserve should take a long pause on any further increase in interest rates. It’s time for a breather,” Winum said.
The August loan volume index dipped to a still strong 75 from July’s 75.9. The checking deposit index sank to 30.8 from 32.7 in July, and the index for certificates of deposits and other savings instruments decreased to a strong 69.2 from 71.2 for July, the release said.
“Higher short-term interest rates produced by Federal Reserve rate hikes over the past year continue to pose a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have risen little over the same time period,” Goss said.
