MADISON, Wis. — The chief economist for CUNA Mutual Group said an improving national economy in the U.S. in the coming years should prove bountiful for credit unions in terms of growth in loans, savings and memberships.
"The U.S. economy has experienced six solid 'recovery and growth' years that will continue to be above-trend in 2016 and into 2017," said Steven Rick at CUNA Mutual Group's sixth annual Discovery Conference. "With… increased consumption spending by consumers, [increased] residential purchases and [increased] business investments, the economy will continue to trend at a strong 2.8% growth rate."
In addition, taking into account a low unemployment rate of 5.1% and "steady" job growth of more than 2 million jobs per year into 2017, credit union membership should continue to increase by 3% annually, CUNA Mutual said.
Also, as the economy approaches full employment by 2017, Rick said wages will rise and consumers will become "more likely" to start spending, translating into more opportunities for credit unions. Indeed, household net worth is now at "record levels" in the U.S., while consumers are "more confident," resulting in new demand for lending, credit and savings products.
As an example, Rick cited the increase in durable goods spending.
"For the last three years, appliance, car, furniture and home improvement purchases were put on hold by consumers," added Rick. "There is now pent-up demand for these items that will continue into 2017. This is good news for credit unions, particularly for their lending businesses."
Moreover, coupled with low interest rates and low oil prices, he said consumers are "feeling better than they have felt in quite some time," and this is resulting in increased spending.
"The savings and lending growth that we will see in the credit union landscape will be a direct result of this rising economic confidence," Rick concluded.
In the presentation, Rick also discussed some specific economic trends that he believes credit unions should take advantage of in the new two years as part of their strategic planning measures:
Home loans
- A shortage of home inventory and a growing demand will create a 9.4% increase in new construction.
- Current home prices will rise by 4% to 5%, as demand grows for the more than 5 million homes on the market each year.
- By next year, first mortgage loan origination will reach "record numbers" for both adjustable rate and fixed-rate loans, reaching more than $137 billion. Refinanced mortgages will slow in the coming years and remain at $134 billion in 2017.
Auto loans
- New auto loan growth will remain strong in 2016, but slower than the record 22% figure set in in early 2015.
- Used auto loan balances will continue to grow at 14% and will continue for the next three years.
Savings
- Savings growth will slow in 2016 and 2017 from 4 to 3% due to potential rising interest rates, and consumers shifting funds to investment alternatives.
CU Membership
- Strong job growth will translate into strong credit union membership growth at a consistent 3% pace into 2017, due to the growing demand for credit.
"Bottom line, the U.S. economy will not be experiencing signs of a recession for the next few years," said Rick. "The economy is growing, inflation remains low, wages are rising, and unemployment is down. These are all indications credit unions have a great opportunity to grow their membership and portfolios of services through the trust they continue to build with their members."
