MADISON, Wis.—Expect the U.S. economy to achieve double-digit loan growth in 2015 and 2016, according to two CU economic groups.
CUNA and CUNA Mutual economists see U.S. loan growth landing at 11% in 2015, above the 10.4% increase in 2014, CUNA reported on its website. The baseline forecast for 2016 is 10% loan growth, the economists said.
“With continued economic expansion, we expect to see further improvement in credit quality,” Perc Pineda, CUNA senior economist, told CUNA’s News Now. “The delinquency rate in the first quarter came in lower than our previous forecast. We now expect the delinquency rate to finish 2015 at 0.7% and to finish 2016 at 0.65%. We kept our outlook for net charge-off rates unchanged at 0.45% in both 2015 and 2016.”
Pineda predicts that any hike in the federal funds rate this year may only temporarily disrupt the market. CUNA and CUNA Mutual Group economists expect the fed funds rate to be at 0.5% by the end of 2015 and at 1.75% by the end of 2016.
“This will affect credit union earnings—interest margin pressures will become more obvious in 2016 and mortgage refinancing will decline—and we expect the return on average assets to decline slightly from 0.8% in 2014 to 0.75% this year, then dipping a bit more to 0.7% in 2015,” Pineda told News Now.
The economists did not share concern for a Q1 0.2% decline in gross domestic product, seeing the underpinnings of the U.S. economy as solid.
“Overall, we expect the U.S. economy will grow 2.2% this year and 3.25% next year,” Pineda said. “Positives include improved consumer confidence, a related uptick in personal consumption expenditures and favorable gas prices. Pressures in the prior months, such as a strong U.S. dollar that weighed on manufacturing and exports, are easing and should support continued economic expansion. Developments in Greece are a key concern.”