ALEXANDRIA, Va. (7/31/14)--Increased loan demands, delinquency reductions and other positive performance indicators show an economy on the rise, but also bring the potential for higher interest rates, according to the latest economic update released by the National Credit Union Administration. NCUA Chief Economist John Worth discusses implications of a recovering economic on credit union balance sheets in the video.
"The recent economic news, especially about the labor market, has generally been very good. Consumer spending is been solid inflation, which is drawing more scrutiny as the labor market has improved, is being contained," Worth said. "The only soft spot has been uncertainty about the strength of the housing market demand. It reflects both lower [refinance] demand and what looks like a slowdown in investor purchases."
Outstanding consumer installment credit at all lenders was up 6.7% over the year ending in May, which represents the biggest 12-month increase since 2002. In the first quarter, outstanding new car loans rose 14%, and used auto loans amounted to about 20% of all loans.
According to the NCUA, outstanding consumer credit at credit unions continues to outpace lending at other institutions.
This growth may come with a rise in interest rates at the Federal Reserve begins to scale back stimulus activates, Worth said. Federal Reserve policymakers recently projected short-term interest rates will begin rising sometime in 2015 if the economy performs in line with current expectations.
Use the resource link below to view the video.