Iowa’s rural economy strengthened in January behind stronger hiring and an improving farm economy, despite continued high agricultural input prices, according to a survey of rural bank managers.

Creighton University’s Rural Mainstreet Index, released on Jan. 19, showed that Iowa’s index increased to 56.3 in January, up from 54.2 in December. The index ranges between zero and 100, with a reading of 50 representing neutral growth for the next six months.

The report shows that Iowa’s new hiring index rose to 55.1, up nearly 2 points from December, while the state’s farmland price index increased slightly to 70.6, from 69.2 the prior month.

“The Rural Mainstreet economy continues to experience improving, but slow, economic growth,” Ernie Goss, the Jack A. MacAllister chair in regional economics at Creighton, said in the report. “Almost 85% of bankers ranked rising input prices as the top economic challenge or threat to farmers in their area.”

For the 10-state region covered by the survey, the index rose to 53.8, from 50.1 in December, marking the second consecutive month of improvement after six straight months of falling below neutral growth.

The survey includes rural agriculture-dependent and energy-dependent states and is focused on about 200 communities with an average population of 1,300 people.

Some key takeaways from the report:

  • The CEO of Hardin County Savings Bank in Eldora, James Brown, said in the report: “Farmer balance sheets continue the three-year trend of increasing working capital and net worth without raising the value of their financial statements.” This, he said, will likely lead to lower borrowing from farmers. His comments come as farm exports from Iowa grew by 8.2% in 2022 to $1.9 billion.

  • The region’s farmland price index rose to 66 in January, up 0.6 points from December. The report indicated that bankers expect strong economic conditions to continue, saying falling farmland prices and loan defaults are low on their list of challenges for 2023. Higher input prices remain a top concern, they said.

  • Despite higher interest rates, the farm equipment sales index climbed to 61.4, up from 60.4 the prior month and its highest level since last June.

  • Despite ongoing labor shortages, the new hiring index for the region increased to 53.9, up from 49.1 in December. Rural communities expanded nonfarm employment by 3.3% over the past 12 months. This compares with 3.0% growth for urban areas of those states included in the survey for the same period.

  • The home sales index remained weak at 38.5 in January, despite rising more than 5 points. Goss said mortgage rates that have almost doubled over the past year combined with low home inventories have slowed home sales in the region.

  • Bankers remained pessimistic for retail sales for the first quarter of 2023, despite an increase in the retail sales index in January to 51.9, up from 45.5 the previous month.
  • The confidence index rose to 40, from 29.6 in December. Despite the increase, Goss said it still represents a “very negative outlook” for the region, continuing a trend that has been seen over the past 10 months.