MADISON, Wis. – Credit unions can expect steady growth as the economy experiences a slight acceleration in 2017, said CUNA Mutual Group’s Chief Economist Steven Rick. This is good news for credit unions looking to expand their reach and services in the next two years, he told attendees of CUNA Mutual Group’s seventh annual Discovery Conference today.
“We’re forecasting a modest acceleration in economic growth to 2.4 percent in 2017 from this year’s very slow 1.6 percent1,” said Rick. “An inventory correction, reduced energy sector investment due to falling oil prices, and the negative impact of the rising dollar on our exports all contributed to the U.S. economy’s slower growth rate. These factors will start to fade in 2017, resulting in a growth rate slightly above the target 2 percent mark1.”
Among the factors helping fuel economic growth are: an acceleration in housing construction due to a shortage of available homes for sale; average hourly earnings rising 3 percent next year; and low oil prices that will start to rise1. Those factors coupled with continued low interest rates will result in increased spending. Expected savings and lending growth at credit unions will be a direct result of rising economic confidence.
“After seven years of extremely low interest rates, we believe the Federal Reserve will begin to normalize rates starting in December,” said Rick. “We’re forecasting rates will rise by a quarter of a point yet this year, and then three more times before the end of 2017 – resulting in about a 1 percent hike in both short and long-term rates1. This will give credit unions originating adjustable rate products a boost in yield on assets.”
With steady job growth of more than 180,000 jobs each month and an unemployment rate falling to 4.7 percent1, the economy will approach full employment in 2017. According to Rick, this will benefit credit unions’ auto lending business. “We’re seeing more Americans buying cars, so we expect to see another record year of vehicle sales in 2017 – with 17.75 million vehicles sold – due to pent-up demand1.”
In addition, the housing market is strong and healthy; it’s no longer the boom-and-bust market consumers experienced during the Great Recession. Next year, home sales are forecast to increase to 5.5 million1, which benefits credit union mortgage lending. Home prices will rise by 5 percent1. These factors will help consumer confidence remain high, keep household balance sheets strong and consumer spending up in 2017.
“We anticipate credit unions will see stronger balance sheets and slightly weaker income statements in 2017,” said Rick. “Credit unions can expect another strong year of loan and deposit growth; however, they’ll likely see falling return on assets due to tighter margins, falling fees and rising expenses resulting in weaker income statements.”
Credit union membership growth is expected to be 3.8 percent in 20161 – the fastest in more than 30 years – due to strong job and loan growth. “Next year, we might see a little bit of a slowdown to 3.3 percent, but still very strong1,” said Rick. He also noted the U.S. population is only growing at 1 percent a year, which means credit unions’ memberbships growing at 3.3 percent a year are picking-up market share from banks and other lending institutions1.
“Bottom line, the U.S. economy will not experience signs of a recession until the end of 2018,” said Rick. “The economy is growing, wages are rising, unemployment is down and savings growth is strong due to low energy prices. These are all indications the economy will remain strong throughout 2017 and into 2018.”
To learn more, watch Rick’s Discovery Conference breakout session, “U.S. Economic Outlook & Its Impact on Credit Unions,” on-demand.
The Discovery Conference is an annual, web-based event sponsored by CUNA Mutual Group. It attracts a national and international credit union audience of more than 1,300. Content is geared toward credit union CEOs and senior leadership teams, and is available on-demand at no cost.
About CUNA Mutual Group:
CUNA Mutual Group helps people plan, protect and invest for their future – regardless of their financial standing. The company was founded more than 80 years ago by credit union leaders who were looking for an insurance partner they could trust. Today, CUNA Mutual Group helps credit unions and hardworking Americans build financial security through commercial and personal insurance products; lending and payment security solutions; and risk management, retirement, investment and marketing services. Additional information about the company can be found at www.cunamutual.com.
CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Life, accident, health and annuity insurance products are issued by CMFG Life Insurance Company and MEMBERS Life Insurance Company. Corporate headquarters are located in Madison, Wis.
1 CUNA Mutual Group’s Discovery Conference, “U.S. Economic Outlook & Its Impact on Credit Unions,” Oct. 18, 2016.
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