Midwest, Plains economic surveys touch on interest rate cuts; North Dakota conditions weak

Almost half of rural bankers recently surveyed in the Midwest and Plains region want two Federal Reserve rate cuts before the end of the year, and a leading economist thinks they'll get their wish.

About 48% of bankers who took part in Creighton University's Rural Mainstreet survey in July advocated for two rate cuts of one-quarter percentage point or one-half percentage point.

The nation is “at a major crossroads between risking the creation of a major recession by keeping interest rates in this range too long just to reach a target inflation number," said Don Reynolds, chair of Regional Missouri Bank in Marceline, Missouri.

Creighton economist Ernie Goss, who oversees the monthly survey as well as the monthly Mid-America Business Conditions survey, said the wholesale price gauge in the latter survey fell in July to a level indicating cooling inflationary pressures.

“This is the fifth straight month that the inflation gauge has fallen," he said. "The regional inflation yardstick has clearly declined into a range indicating inflationary pressures moving toward the Federal Reserve’s target for the second half of 2024. As a result, I expect the Fed to cut interest rates two times in the remaining months of 2024.”

The Federal Reserve System's Federal Open Market Committee next meets Sept. 17-18.

Surveys' results

The two Creighton surveys serve as leading indicators of economic conditions in the Midwest and Plains region.

The Rural Mainstreet Index is based on a survey of rural bankers in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. It focuses on about 200 rural communities with an average population of 1,300 people.

Its overall index in July sank below growth-neutral for an 11th straight month, to 41.3 from 41.7 in June and 44.2 in May. Any readings above 50 on the index that ranges from 0 to 100 suggests economic growth in the months ahead, with readings below 50 indicating decline. Goss cited weak agriculture commodity prices, sinking agriculture equipment sales and declining farm exports for July's number.

The Mid-America study surveys supply managers in Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota. Its overall index in July was above growth neutral for the fourth time this year, but it declined slightly to 50.7 from June's 51.3.

“The overall index, much like the U.S. reading, has vacillated around growth neutral since December of 2023," Goss said. "Additionally, supply managers remained pessimistic regarding the 2024 outlook, with only 11% expecting growth for the rest of 2024.”

The Mid-America survey's business confidence index, which looks ahead six months, slumped to 30.6 from June’s 34.2.

The Rural Mainstreet confidence index fell to 28.3, down from June's 29.2 and its lowest level this year.

North Dakota data

North Dakota's overall index in the Mid-America survey in July was below growth-neutral for a fifth straight month at 49.8, though that was up from 45.5 in June and 40.2 in May. Components of the overall index for July were: new orders at 50.1, production or sales at 48.8, delivery lead time at 54.0, employment at 43.7 and inventories at 52.6.

North Dakota 2024 year-to-date exports sank to $2 billion from $2.8 billion for the same period in 2023, for a 28% reduction, according to the latest U.S. International Trade Administration data.

North Dakota's overall index in the Rural Mainstreet survey remained slumped in July at 38.1, up only slightly from 36.3 in June and down from 41.2 in May. The state’s farmland price index declined to 46.5 from 47.5 in June. The state’s new hiring index rose to 50.2 from 44.9 in June.

Exports of North Dakota agriculture goods and livestock for 2024 year-to-date were up by $22 million, or 5.9%, from the same period in 2023, according to ITA data.

The full Creighton reports can be found at bit.ly/3Y0SedN and bit.ly/3SavggB.

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