WASHINGTON-More than one-quarter of Americans are spending more and saving less than they did one year ago, according to a new study, but the credit union community does not seem to be unduly worried by the findings.
"Saying that people are spending more doesn't surprise me at all," said Mike Schenk, VP- economics and statistics with CUNA."Incomes are higher, the economy is improving and unemployment has come down, so naturally people will spend more in those circumstances."
He noted that disposable income levels have also risen year over year, so more spending is to be expected.
Contesting NFCC Findings
Schenk also contested the findings of the survey, released by the National Foundation for Credit Counseling, that savings are down. Savings have "increased almost 13% over last year; it's not necessarily the case that when people spend more they save less." He offered the statistic that the personal savings rate-the amount of take-home pay that gets saved-averaged 5.6% during the first two months of 2010 and rose to an average of 6% for the first two months of 2011.
"The real story," said Schenk, "is that the data shows that it's in fact true that people are spending more money, but also saving more."
Brian Orenstein, CEO of Charter Oak FCU in Groton, Conn., echoed Schenk, pointing out that, at least in his market, "we have not seen that consumers are spending more today than last year." Additionally, he noted that Charter Oak is still seeing increased savings deposits, with Q1 2011 surpassing the savings rate for Q1 2010, despite lower rates. "We can't stop it from coming in," he said.
Regardless of the savings rate, an increase in spending could be a sign of loan growth-but new data shows lending has actually decreased at credit unions over the past five months
"We've seen some uptick in auto, but it's too early to say if that's a trend," said Orenstein. He added that COFCU saw something of a re-fi boomlet last year, "but it takes a lot of little auto loans to equal a mortgage loan. We may do more loans for less dollars-we could certainly use a jump in the housing market for new purchases-but I don't think anyone's forecasting that."
Conversely, Chris Jillson, president and CEO of Sandia Laboratory FCU in Albuquerque, noted that after two years of record deposit growth, members of his credit union have slowed their rate of saving a bit. He still expects to see, however, 10% deposit growth for 2011. In 2010 Sandia Laboratory's deposit growth was just shy of 15%.
While savings is slowing, Jilson noted that it hasn't slowed to a worrisome level, and that loan volume has also increased a bit-mostly in the auto realm-and he expects further increases as the year continues.
"People think things are a little bit better," said Jillson. "Prior to this whole thing, the nation was having negative savings growth, which was crazy. It's more that people are getting a bit more confidence in economic conditions and they don't think they need to save quite as much as before. I think that there was more of a fear factor when things were collapsing."
Consumers Give Selves Poor Marks
The NFCC study also found that when assessing their own level of financial literacy, two-out-of-five Americans give themselves a grade of C or lower-a finding that many in the CU community were hard pressed to contest.
While credit unions have long made attempts to provide effective financial education for their members and the public at large, "it's clear that we can do more," said CUNA's Schenk. "We've done good things in the past, but we need to redouble those efforts and get people to understand how financial health really improves your life."
