MADISON, Wis. – Credit unions can expect to continue to see strong growth in loans, savings and memberships as the economy experiences healthy growth in the coming years, according to CUNA Mutual Group’s Chief Economist Steve Rick.
All of that is good news for credit unions looking to expand their reach and services in the next two years, Rick told attendees of CUNA Mutual Group’s sixth annual Discovery Conference Wednesday.
“The U.S. economy has experienced six solid recovery and growth years that will continue to be above trend in 2016 and into 2017. With the increased consumption spending by consumers, residential purchases and business investments, the economy will continue to trend at a strong 2.8% growth rate,” said Rick.
Coupled with a low unemployment rate of 5.1% and steady job growth of more than two-million jobs into 2017, these indicators translate to a continued 3% increase in membership for credit unions, the strongest in a generation, Rick is projecting.
As the economy approaches full employment by 2017, wages will rise and consumers are more likely to start spending, translating into increased opportunities for credit unions, said Rick. Household net worth is at record levels in the U.S., and consumers are more confident, resulting in new demand for lending, credit and savings products. One example of this is the increase in durable goods spending, he said.
“For the last three years, appliance, car, furniture and home improvement purchases were put on hold by consumers. There is now pent-up demand for these items that will continue into 2017. This is good news for credit unions, particularly for their lending businesses,” said Rick. “Coupled with the fact that interest rates and oil prices remain low, consumers are feeling better than they have felt in quite some time, and this is resulting in increased spending. The savings and lending growth that we will see in the credit union landscape will be a direct result of this rising economic confidence.”
Rick outlined several economic indicators that credit unions should note for strategic planning in the coming years:
Solid growth in new home loans:
- A shortage of home inventory and a growing demand will create a 9.4% increase in new construction.
- Current home prices will rise by 4% to 5%, as demand grows for the more than 5 million homes on the market each year.
- By 2016, first mortgage loan origination will reach record numbers for both adjustable rate and fixed rate loans, reaching more than $137 billion. Refinanced mortgages will slow in the coming years and remain at $134 billion in 2017.
Auto loans stay on the rise:
- New auto loan growth will remain strong in 2016, but slower than the record 22% pace set in in early 2015.
- Used auto loan balances will continue to grow at a 14% growth rate and will continue for the next three years.
Savings may slow as spending increases:
- Savings growth will slow in 2016 and 2017 from 4% to 3% due to potential rising interest rates, and consumers shifting funds to investment alternatives.
Continued strong membership growth:
- Strong job growth will translate into strong credit union membership growth at a consistent 3%pace into 2017, due to the growing demand for credit.
“Bottom line, the U.S. economy will not be experiencing signs of a recession for the next few years,” said Rick. “The economy is growing, inflation remains low, wages are rising, and unemployment is down. These are all indications credit unions have a great opportunity to grow their membership and portfolios of services through the trust they continue to build with their members.”