MADISON, Wis. (9/26/14)--A newly minted economic and credit union forecast has been posted by Credit Union National Association economists at their now easier-to-access website at www.cuna.org/economics.
As usual, the posting includes summary tables and a short narrative to help readers understand what is likely to happen in the economy and how developments are apt to influence credit unions' interactions with members.
"Our current outlook isn't much different from the one we published last quarter," said Mike Schenk, vice president of CUNA Economics and Statistics. "The most significant tweaks are reflected in a slight downward revision in overall economic growth next year and a marginally rosier outlook for loan growth," he said.
CUNA economists now expect the U.S. economy to grow 2.20% in 2014 and 3.25% in 2015. Inflation will remain near the Federal Reserve's target of 2% for the remainder of 2014 and into 2015.
The unemployment rate will fall below 6% by the end of 2014 and below 5.5% by the end of 2015. This should keep the Federal Funds interest rate in the 0.00%-0.25% range through the remainder of 2014, with the first increases expected mid-year 2015. Ten-year Treasury interest rates will stay below 3.1% in 2014 and likely average 3.4% in 2015.
Credit union loan balances are now expected to rise 10.6% in 2014 and 11% in 2015, CUNA economists said. Loan growth of 10.6% will be the fastest since the 11% increase in 2005 as households to continue to release pent up demand for autos, furniture and appliances over the next two years.
Credit union savings balances are expected to grow 3.5% in 2014 and 3% in 2015. Memberships will continue to grow quickly. Overall, expect a 2.25% increase--more than twice as fast as the 1% growth in population. That membership growth will help buoy both loans and savings growth, all else equal. Credit quality will continue to improve in 2014 and 2015, and bottom-line results will remain strong.
Also, expect credit union returns on assets to rise to 0.85% in 2014 and 0.95% in 2015, as rising asset yields--due to faster loan growth--increase net interest margins.
Capital-to-asset ratios will rise to 11.1% in 2014. Stronger earnings will mean that capital growth will outpace asset growth over the next two years, increasing the capital-to-asset ratio. In fact, credit union capital ratios are very likely to reach a record high of 11.6% in 2015, above the previous high of 11.5% set in 2006, CUNA's economists said.
To access the latest economic forecast, use the link.