Eight of 10 Bank CEOs Report Negative Tariff Impacts

Posted on 09/20/2018 12:21 PM

The latest sampling of rural banker attitudes finds rising concerns about the impact of a lingering trade war. The Creighton University Rural Mainstreet Index (RMI), a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, declined to 51.5 from 54.8 in August. The index ranges between 0 and 100 with 50.0 representing growth neutral.

"Our surveys over the last several months indicate that the rural mainstreet economy is expanding outside of agriculture. However, the negative impacts of recent trade skirmishes have begun to surface, weakening already anemic grain prices," says Creighton's Ernie Goss, who conducts the survey.

Farming and ranching: The farmland and ranchland-price index for September sank to 37.5 from 44.7 in August. This is the 58th straight month the index has fallen below growth neutral 50.0.

The September farm equipment-sales index fell to 35.9 from August's 37.8. This marks the 61st consecutive month that the reading has moved below growth neutral 50.0.

Banking: Borrowing by farmers expanded for September, according to the survey, but at a slower pace than in August, as the loan-volume index declined to 65.3 from 72.2 in August. The checking-deposit index increased to 39.4 from August's 36.0, while the index for certificates of deposit and other savings instruments fell to 45.5 from 48.8 in August.

Hiring: The employment gauge dipped to a strong 65.3 from August's 68.7. The Rural Mainstreet economy is now experiencing positive job growth. Over the past 12 months, the Rural Mainstreet economy added jobs at a 2.3 percent pace compared to a lower 1.7 percent for urban areas of the same 10 states.

Confidence: The confidence index, which reflects expectations for the economy six months out, rose to a weak 49.5 from August's 46.5, indicating a pessimistic economic outlook among bankers.

"Just as last month, tariffs and trade tensions weakened the economic outlook of bank CEOs," states Goss.

Bankers were asked their position on recently implemented and proposed tariffs on imported goods. More than eight of 10 bankers, or 81.9%, reported negative impacts on the local economy from tariffs. Despite this, fewer than half, or 42.4%, support cutting or eliminating those tariffs. Approximately 45.5% support continuing current tariffs and trade policy, while 12.1% endorse pursuing a more hawkish approach by raising tariffs.

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.

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