The Rural Mainstreet Index (RMI) fell below growth neutral for the only the second time this year. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the RMI for August indicated negative growth for the region.
Overall: The overall index slumped to 46.5 from 50.2 in July. This is the lowest reading for the index since October 2017. The index ranges between 0 and 100 with 50.0 representing growth neutral, and an RMI below the growth neutral threshold. 50.0, indicates negative growth for the month.
"The trade war with China and the lack of passage of the USMCA (NAFTA's replacement) are driving growth lower for areas of the region with close ties to agriculture. Despite a $16 billion federal government support package coming soon, a drop in farm income is negatively affecting the rural mainstreet economy," says Creighton University's Dr. Ernie Goss, who conducts the monthly survey.
Three of four bankers reported the trade war was having a negative impact on their local economy.
As stated by Jeffrey Gerhart, CEO of the Bank of Newman Grove in Newman Grove, Nebraska, "Trade wars have been and will continue to be a drain on our ag economy"
"Despite the negative impact of tariffs and the trade war, only 28.2% of bankers support cutting tariffs on imported goods from China," states Goss.
Rod Cornelius, market president for Pinnacle Bank in Grand Island, Nebraska reports, "I quickly surveyed 12 local producers, a majority indicated (U.S. should) increase tariff pressure - go big or go home. Although the majority again indicated the tariffs are negatively impacting the local economy."
Farming and ranching: The farmland and ranchland-price index for August improved to a still weak 46.3 from July's 45.6. This is the 69th straight month the index has remained below growth neutral 50.0.
The August farm equipment-sales index dropped to 30.3 from July's 37.9. This marks the 72nd straight month the reading has remained below growth neutral 50.0. "The dismal economic outlook for farm income continues to decimate agriculture equipment sales in the region," reports Goss.