NAFCU Brightens Economic Outlook for 2020

NAFCU has brightened its economic outlook for 2020 a small amount, but credit union loan growth will be slower.

In August, NAFCU forecast gross domestic product would rise 2.3% this year and 1.6% in 2020. Its forecast released Monday shows it expects GDP to slow from 2.6% this year to 1.7% in 2020, and 2.4% in 2021.

Consumer spending is the main pillar supporting NAFCU’s view of continued growth, rising 3% growth this year, to 2.2% next year and 2.5% in 2021. In August, NAFCU predicted a sharper slowdown in consumer spending, with a gain of 2.6% in 2019 followed by a 2.1% gain in 2020.

NAFCU Chief Economist Curt Long said the revisions reflect the continued buoyancy of consumer spending and recent lessening of trade tensions with China and others.

“Business investment really softened, and yet the consumer has remained strong,” Long said.

“And while business investments have fallen, they are continuing to hire,” he said. “As long as that’s happening, there’s no reason households should not feel as confident as they have. It should be enough to keep us away from recession.”

For credit unions, NAFCU has become slightly more pessimistic on loan and share growth, but more optimistic on net income and membership growth. NAFCU now forecasts:

• Membership growth will be 3.5% for 2019, down from a peak of 4.4% in 2018, and will slow further to 3.3% in 2020 and 3.2% in 2021. In August, NAFCU expected membership growth to be 3.3% in 2019 and 3% in 2020.
• Loan growth will be stay at 6% this year, and rise to 6.5% in 2021. In August, it expected loans to rise 7% this year, and 6% next year.
• Share growth will remain at 6.5% next year and fall to 6% in 2020. In August, it expected shares to rise 7.5% in 2020.
• Return on average assets will be 0.90% this year, and 0.85% in 2020 and 2021. In August, it expected ROA of 0.85% this year and 0.75% in 2020.

NAFCU revised its 2020 expectations upwards a month after CUNA released downward revisions.

CUNA released forecasts in October showing economic growth slowing from 2.1% this year to 1.5% in 2020, down from the 1.8% growth in 2020 forecast in June.

CUNA is expecting the sharper slowdown in the economy to dampen loan growth, membership growth and returns at credit unions in 2020:

• Loans will grow 5.5%, down from 7% in the previous forecasts.
• Membership will grow 2.5%, down from 3% from previous forecasts.
• ROA will be 0.75% next year, down from a 0.80% forecast in June.

Both CUNA and NAFCU expect loan quality to remain good. NAFCU expects delinquency rates to increase from 0.7% this year, to 0.8% in 2020 and 2021, unchanged from its August forecast.