A group of credit union economists is projecting a modest pick-up in the economy for the remainder of 2003 and into 2004.
In its recently released quarterly report, the Credit Union Economics Group (CUEG) expects overall GDP growth of 2.4% in 2003. The group of credit union economists also anticipates an "uptick" in interest rates and flatter vehicle sales.
"We are beginning to feel the impact of the federal tax cut and government spending programs," said Dave Colby, CUNA Mutual economist. "While there is a good deal of stimulus in the system, we haven't fully seen it work through the economy. Therefore we remain guarded in our forecast due in part to a weakness in the employment outlook."
CUEG economists have lowered their forecast for credit union loan growth in 2003 from 7.0% to 6.6%, reflecting the continued weakness in consumer installment lending, particularly new auto. "Consumers may be hesitant to take on new debt," said Scott Mainwaring, executive vice president/CFO, Vystar Credit Union, Jacksonville, FL. "In addition, we don't expect new-vehicle loans to pick up because the Fed rate cut will make it cheaper for manufacturers and dealers to offer incentive financing. Those incentive programs will be pushed aggressively and will cut into credit union opportunities."
CUEG's July Consensus Forecast also noted:
* Unemployment-rate forecasts were revised up to average 6.3%, dipping to 6.2% in 2004.
* Share deposits are expected to increase 11.3% during 2003.
* Mortgage originations are expected to remain strong, with CUs urged to actively manage their interest rate risk exposures, particularly on fixed-rate first mortgages.
"While the CUEG group expects an improving economic environment over the next six months, credit unions are likely to continue to experience relatively strong share growth, with loan demand concentrated in real estate and used-auto products," said NAFCU senior economist Jeff Taylor.
Members of the group include: Bruce Beaudette, president/CEO, Sunmark FCU, Schenectady, NY; Bob Burrell, EVP/CIO, Western Corporate FCU, San Dimas, Calif.; Dave Colby, AVP/corporate economist, CUNA Mutual Group, Madison, Wis.; Dave Dickens, SVP-ALM, U.S. Central CU, Lenexa, Kan.; Bruce Fox, SVP/SIO, Southwest Corporate FCU, Dallas; Scott Mainwaring, EVP/CFO, Vystar CU, Jacksonville, Fla.; Brian McVeigh, SVP/CFO, State Employees CU, Lansing, Mich.; Jeff Taylor, senior economist, NAFCU, and Tun Wai, director research/chief economist, NAFCU.