Tuesday, November 24, 2020

Creighton University's Rural Mainstreet Index Retreats for First Time Since April: Bankers Expect 3.1% Decline in Holiday Sales

 From Creighton's Heider College of Business:

November Survey Results at a Glance:

  • Moving below growth neutral, the overall index fell for the first time since April of this year.
  • For the first time since 2013, Creighton’s survey recorded back-to-back increases in monthly farmland prices.
  • Compared to 2019, bankers expect 2020 retail sales to be down by 3.1%.
  • Approximately, 54.8 % anticipate a reduction from 2019, and 16.1% project an upturn from last year’s holiday sales.
  • The November loan volume reported record lows as the index fell to its lowest since the initiation of the survey in 2006.
  • Bankers project 9.2% of grain farmers will experience negative cash flows for 2021, down from 12.4% expected from the November 2019 survey.

OMAHA, Neb. (Nov. 19, 2020) - For the first time since April of this year, the Creighton University Rural Mainstreet Index (RMI) declined. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the index fell to its lowest level since August of this year.

Overall: The overall index for November sank below growth neutral to 46.8 from October’s 53.2. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

“Recent improvements in agriculture commodity prices, federal farm support payments, and Federal Reserve’s record low interest rates have underpinned the Rural Mainstreet Economy. Still, only 6.5% of bankers reported economic improvements from October, while 12.9% detailed economic pullbacks for the month,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Farming and ranching: For a second straight month, the farmland-price index advanced above growth neutral. The November reading jumped to 55.0 from October’s 50.6. This is first time since 2013 that Creighton’s survey has recorded back-to-back above growth neutral readings in farmland prices.

The November farm equipment-sales index increased to 42.9, its highest level since December 2013, and up from 37.9 in October. However, this marks the 86th straight month the reading has remained below growth neutral 50.0.

Banking: Bankers reported record low loan volumes for November. The November loan volume index fell to its lowest since the initiation of the survey in 2006. The lending index slumped to 25.8 from October’s 46.8. The checking-deposit index soared to 87.1, a record high, from 66.1 in October, while the index for certificates of deposit, and other savings instruments rose to 46.8 from 38.7 in October.

This month bankers were asked to project the share of grain farmers likely to experience negative cash flow for 2021. Bankers expect 9.2% of grain farmers’ cash expenses to exceed cash revenue. This is an improvement from 2019 when bankers projected 12.4% of farmers to experience negative cash flows for 2020....