Credit unions could see a double-digit increase in lending growth this year based on the CUNA Economic and Credit Union Forecast.
“We expect loan growth to stay upbeat, rising 10% this year,” said Perc Pineda, CUNA senior economist. “As labor markets continue to strengthen, household consumption will stay strong.
"While auto lending could be marginally weaker than last year, technological enhancement in new vehicles will continue to generate healthy auto demand," he added. "The housing market is still in recovery mode, but housing demand remains strong. Both factors will continue to support healthy auto and mortgage lending at credit unions in 2017.”
The overall U.S. economy grew by 2% in 2016 and will continue to expand by 2.5% in 2017, CUNA economists said.
“A strong driver of economic growth in 2017 will be the turnaround in business investment spending,” Pineda said. “If government spending in infrastructure materializes, it will contribute to economic growth in the long run. Both higher business investment spending and government spending will push the unemployment rate lower. However, the global economic climate will continue to influence the rate of U.S. economic growth.”
CUNA economists expect the Federal Open Market Committee (FOMC) to raise the federal funds interest rate 3 times this year to 1.4% by year-end. Rising output, tighter labor markets, and higher inflation in 2017 will cause the FOMC to continue monetary policy normalization.
“We expect the 10-year Treasury yield to top 3% by December,” Pineda said.
Memberships will increase in 2017 by 3.5% due primarily to recognition of the positive credit union value proposition. Membership growth in 2017 will be marginally lower than 2016 as the auto lending boom begins to slow and indirect borrower memberships decline.
As the economy continues to expand, CUNA economists expect higher household consumption in autos, furniture and appliances throughout the year. “New auto loans, credit card loans and purchase mortgage loans will remain strong growth areas,” Pineda said.
Credit quality will remain healthy in 2017. The improving job market and fast loan growth (the denominator of the loan quality ratio) will keep the delinquency ratio down to 0.75% in 2017. Net charge-offs will likewise decline to 0.5% in 2017.
Credit union savings balances will grow by 5.5% in 2017, CUNA economists said. “Our credit union savings growth forecast for 2017 is lowered marginally from 6% to 5.5%,” Pineda said. “This is primarily due to changing interest rate environment and other economic fundamental factors such as higher inflation and moderate economic growth, which will cause members to be cautiously optimistic and seek higher returns.”