CUNA Still Sees Growth, but Headwinds Rise

Economic growth is slowing, but 2019 is still likely to better than most years for credit unions, a CUNA economist said.

Samira Salem, a senior policy analyst, said she and other CUNA economists expect this year’s growth rate will be better than most, but not as big as 2018.

“We’re well into the 10th year of economic expansion, and are hitting the late stage of the business cycle where we’re starting to see some headwinds predominating,” Salem said.

Salem made no mention of the partial federal government shutdown in CUNA’s monthly “Economic Update” video presentation posted on Monday. The chief “downside risk” she mentioned was the trade dispute with China, which she said has already caused increased prices for some manufacturers and weaker sales for farmers hurt by retaliatory tariffs.

Other risks are rising interest rates, slowing growth abroad, Brexit, volatility in the stock market, declines in U.S. Treasury yields and the waning effects of the tax cuts.

On the plus side, Salem said the labor market remains strong with a “whopping” 312,000 non-farm jobs added in December and unemployment rate that ended the year at 3.9%.

The forecasts CUNA released were largely unchanged from September. Tweaks included raising the forecast for 2018 GDP growth to 3.1%, up 10 basis points from September. Its forecast for 2019 GDP growth was unchanged at 2.25%. It also raised its forecast for credit unions’ return on average assets to 0.95% for 2018 and 0.85% for 2019, both up 10 bps.

CUNA also released its estimates for the November 2018 loan portfolio, showing total loans rose 9.4% to $1.06 trillion in the 12 months ending Nov. 30, with auto lending continuing to be the leading source of growth. The report showed:

• New auto loans rose 11.8% to $147.6 billion.
• Used auto loans rose 9.9% to $222.9 billion.
• Unsecured loans rose 7.2% to $105.1 billion.
• Fixed-rate first mortgages rose 7.1% to $302.6 billion.
• Adjustable-rate first mortgages rose 13.2% to $125.3 billion.
• Second mortgages rose 9.4% to $32.9 billion.
• Home equity lines of credit rose 5.4% to $57.3 billion.
• All other loans rose 14.7% to $67.9 billion.

Meanwhile, the Fed’s G-19 Consumer Credit Report showed a general slowing in credit card and term loan growth for all lenders, comparing 30-day growth from Oct. 31 to Nov. 30 to the one-month changes a year earlier.

Credit unions held $61.3 billion in credit card debt on Nov. 30, up 8.2% from a year earlier.  Credit unions’ change from Oct. 31 to Nov. 30 was 1.3%, down from a 2% gain a year earlier.  Credit unions’ share of credit card debt was 6% in November 2018, unchanged from October 2018 and up from 5.7% in November 2017.

Lenders of all types held $1.02 trillion in credit card debt, up 2.4% from a year earlier. The change was 2% from Oct. 31 to Nov. 30, down from 2.5% a year earlier.

For credit union non-revolving consumer loans (about 94% for cars), credit unions held $397.4 billion in November 2018, up 9.8% from a year earlier. The increase was 0.6% from Oct. 31 to Nov. 30, slowing from a 0.8% increase a year earlier.

Among all lenders, total non-revolving debt was $2.94 trillion on Nov. 30, up 5.1% from a year earlier. All lenders’ change from Oct. 31 to Nov. 30 was 0.2%, compared with 0.3% a year earlier.

Among all lenders, about 53% of non-revolving loans are for student loans and 39% for vehicles, based on the Fed’s report for September 2018. The car and student loan breakdowns are provided quarterly, and will next be released with the report for December 2018 scheduled for release Feb. 7.