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CU Snapshot

 Apr '18Mar '18
# of CUs5,7245,727
Total Assets
($ billions)
Total Savings
($ billions)
Net Cap.
Loans to Savings82.9%81.5%
Loan Delinq.0.8%0.8%

         Credit Union Indicators

Expect Strong Loan Growth

Economists see boost in credit quality.

CUNA and CUNA Mutual Group economists jointly predict loan growth of 11% in 2015 for the U.S. economy, higher than the 10.4% increase in 2014.

The economists forecast 10% baseline loan growth for 2016.

"With continued economic expansion, we expect to see further improvement in credit quality," says Perc Pineda, CUNA senior economist. "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."

While the federal funds rate hike this year may have a significant "announcement effect," market participants have been strategizing their response to a rate hike for some time, Pineda notes. Any market disruptions should be minimal and temporary. CUNA and CUNA Mutual Group economists now expect the fed funds rate to be 0.5% by the end of 2015 and 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 says.

Despite uneven first quarter data—particularly a 0.2% decline in gross domestic product—the U.S. economy's underpinnings are solid, CUNA and CUNA Mutual Group economists say. The first quarter reflected some transitory weakness, and while the economists modestly scaled back their second quarter GDP growth forecast to 3%, they kept their third and fourth quarter forecast at 3%.

"Overall, we expect the U.S. economy will grow 2.2% this year and 3.25% next year," Pineda says. "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."

The labor market, while not completely recovered, reflects broad improvement, the economists say.

They expect the unemployment rate to continue to drop to 5.2% and 4.9% in 2015 and 2016, respectively. Prices, although on the low side, have been stable.

While the group's 2015 forecast for core inflation is unchanged at 1.75%, it expects headline inflation to rise to 1.5% in 2015. "Our baseline forecast for both headline and core inflation in 2016 is 1.75%, as energy price increases work their way through the system," Pineda says. "Oil prices are still below historic highs, which should help to keep inflation below the Federal Reserve's 2% target this year and the next."

(Via News Now)