Credit unions can expect slower loan growth, accelerated savings growth, and a sluggish economy in the months ahead, says Steve Rick, chief economist for CUNA Mutual Group.
During a presentation at the 2019 CUNA Lending Council Conference Wednesday in New Orleans, Rick made these observations about the economy and its effect on credit unions:
The U.S. economy remains strong due in large part to low unemployment, rising wages, and strong consumer confidence. However, the U.S. trade war with China, declining business spending, uncertainty over Brexit, a possible recession in Europe, and slowing growth in China are hindering economic growth.
Rick forecasts 2.3% economic growth in 2019 and 0.5% growth in 2020, before the economy “comes roaring back in 2023” with 3% growth.
Credit union loan growth will fall from 6.5% in 2019 to 6% in 2020 and 3% in 2021, before rebounding to 5% in 2022 and 8% in 2023.
Rick predicts credit union deposits will grow 7% in 2019 and 9% in both 2020 and 2021 before falling to 6% and 5% growth in 2022 and 2023, respectively.
Interest rates will remain low and possibly decline as the economy slows. Expect continued low inflation.
Unemployment will trend upward as economic growth slows. This may cause loan delinquencies to rise somewhat.
New-vehicle sales will fall from 16.8 million in 2019 to 16 million in 2020, continuing the decline in credit union auto lending. The rise of ride-sharing services will present an ongoing challenge for credit unions’ lending efforts.
Strong home sales will continue and home price growth will slow to 3.5% in 2021 from 5% today.
“This will give credit unions a tailwind in mortgages,” Rick says. Much of the housing market strength is due to millennials, who are entering their peak home-buying years.
“Credit unions have experienced big increases in loan and membership growth in recent years,” Rick says. “Credit unions will sail through a recession if there is one.”
Credit Union Magazine’s Spring 2023 issue features the 2023 Credit Union Heroes and examines CUNA-League advocacy priorities, board leadership, the impact of financial well-being efforts, fee-related compliance issues, predictions for the year ahead, and more.
