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Rural Mainstreet Index takes largest monthly fall ever; majority of rural Midwest bankers anticipate recession


The Creighton University Rural Mainstreet Index  plummeted in March to its lowest level since October 2016, as six out of 10 rural bankers in the Midwest say they expect the coronavirus threat will produce a recession. 

According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, this is the first reading below growth neutral after six straight months above the 50.0 threshold.      

The overall index for March slumped to 35.5 from 51.6 for February. March’s decline represents the largest one month fall since the survey was initiated in January 2006.

“Approximately 61.3% of bank CEOs expect the coronavirus to produce a recession in their market area. However, almost one-third, or 32.3% expect little economic impact from the coronavirus threat,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business. 

The magnitude of the drop in the index was “very surprising,” Goss said in a phone interview late Thursday. 

“I didn’t know that it would take that much of a tumble, given the worst is likely yet to come,” he said. “This is a bigger drop than when we entered the recession back in 2009.  We didn’t conduct the survey [in 2001] after 9/11, but I wouldn’t have expected even that much of an impact after 9/11.” 

The confidence index, which reflects bank CEO expectations for the economy six months out, plunged to 28.3 from February’s favorable and healthy 58.1. March’s reading represented the greatest one month decline in the confidence reading since the survey was initiated in 2006. 

Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included in the survey, which was conducted March 13-18.  The survey focuses on approximately 200 rural communities with an average population of 1,300.   

The March Rural Mainstreet Index for Iowa fell to 31.0 from February’s 50.1. Iowa’s farmland-price index slipped to 44.6 from February’s 45.9. Iowa’s new-hiring index for March sank to a regional low of 28.5 from February’s 47.7. Between 2018 and 2019, total exports for the state slumped by 8.3%, with food and agricultural commodities representing 32.3% of total exports for 2019.   

Goss said he doesn’t think that the bankers’ expectations were greatly influenced by the federal government’s bailout plans, which are focused largely on relief for the airline industry, restaurants and tourism-related — and they have yet to be implemented. For rural bankers, “agricultural commodity prices are much more of an influence,” he said. 

What’s the likelihood of this economic crisis extending over several months? 

“It’s almost baked-in that it’s going to extend for longer than expected,” Goss said, given major closures of institutions such as his own Creighton University and universities across the Midwest. Additionally, K-12 school closures will extend the economic impact because working parents may not be in a position to return to work if they can’t find child care for school-age kids. 

Another factor that hasn’t been discussed much yet Is the hit that state and local tax collections will take from the massive shutdowns, as attractions, hotels and restaurants are shut down. 

“For example, in Omaha the zoo and other venues that take in tax money that just aren’t open 
And the hotels are down to 20% or 30% occupancy. That’s a lot of tax collections that aren’t going to be there.”  

Over the last two weeks the coronavirus has resulted in almost one-half, or 47.6%, of bankers surveyed reporting a decline in client or customer visits. Almost one-fourth, or 23.8%, indicated that their bank had experienced higher loan applications resulting from the coronavirus threat.   

Another 14.3% of banks reported an increase in staff absences due to the coronavirus.

However, not all banks experienced impacts. According to Don Vogel, CEO of Farmers National Bank in Phillipsburg, Kansas, said: “Our rural area has not been directly impacted by the virus as of yet.” 

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