June RMI remains above growth neutral, but bankers report loan defaults

The Rural Mainstreet Index, a monthly survey of bank CEOs in the Midwest, shows growth in the rural economy despite current challenges in the ag industry.

Creighton University economist Ernie Goss says he was surprised the survey was above growth neutral this month. The index ranges between 0 and 100 with 50 representing growth neutral. The index for June climbed to 53.2.

“With the trade tensions and trade war,” he says. “Likewise, the weather has not been good across the nation for a lot of farmers and a lot of farmers in this part of country are under water and haven’t got their planting in yet.”

He says ag prices, housing, and employment helped boost the index.  

“A lot of that is higher agricultural commodity prices,” he says. “Retail sales bounced up for the month and that was good news and we saw employment up for the month.”

More than one in four bank CEOs surveyed reported rising loan defaults because of farmer financial stress, but Goss says it’s not at crisis level.

“Right now the defaults are up, I won’s say dramatically, but the rate is probably double what it was this time last year but still I would say reasonable,” he says.

Almost half of the bankers surveyed reported that due to crisis level farm income, some farmers in their area are selling or leaving the farm.

Goss says the industry will likely be looking for the Federal Reserve to provide relief through an interest rate cut.

Audio: Ernie Goss, Creighton University

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