A monthly survey of bank CEOs in rural areas across Iowa and nine other Midwestern states finds economic indicators sliding for the sixth straight month.
Creighton University economist Ernie Goss conducts the Rural Mainstreet Index and says the February poll shows rural bankers are not optimistic about the immediate future.
“One-third say recession and, of course, it’s all to do with farm income which is down,” Goss says. “The ’16 is probably going to be down from ’15, the 2015 was down from ’14 and ’14 was down from ’13. It’s creating some real problems for the rural economy.” Goss says there is a slowdown in manufacturing and there has been a cut in sales abroad. He fears the Federal Reserve Board will likely raise interest rates next month.
“I think there’s a 40 to 50% chance they are going to raise rates,” Goss says. “The latest CPI numbers, Consumer Price Index numbers, were not very comforting. It shows inflation is ticking up and the Fed is getting scared.” While motorists in Iowa are enjoying some of the lowest gasoline prices in years, the collapse of prices has the nation’s oil industry reeling and that’s carrying over to many other sectors of the economy.
Goss predicts few changes coming in that arena. “It has a lot to do with the value of the dollar,” Goss says. “If the dollar would come down in value, that would tend to push oil prices up. Right now, short of an agreement between the big producers, Saudi Arabia, Iran, Russia and some others, we’re probably going to see prices within this range, $30 to $40 and maybe as high as $50 a barrel.”
Goss says that puts downward pressures on investors, but some sectors benefit from the oil prices, including agriculture.