SAN FRANCISCO — The sluggish recovery, characterized by high unemployment and a lack of consumer confidence, is creating a difficult climate for credit unions for the foreseeable future, a panel of economists from the Credit Union Economics Group told attendees at NAFCU’s Annual Conference.
NAFCU Chief Economist Tun Wai said his association is forecasting a growth in the Gross Domestic Product of 2.8% for this year, .9% for next year and 3.5% for 2012.
There will be a 1.6% decline in outstanding consumer credit this year, a 2.5% increase next year and a 2% growth in 2012, Wai said at the Thursday panel discussion.
This year’s conditions are making it difficult for the economy to improve, said NCUA Chief Economist John Worth.
“There’s not much demand for housing and while personal consumption grew 4% in the fourth quarter of last year, consumer confidence collapsed early this year, in part because of high oil prices,” Worth said.
But when conditions improve this will increase demand for loans by credit unions and when unemployment drops delinquencies will drop, he added.
CUNA Mutual Group Chief Economist David Colby expressed more cautious optimism.
“The economic path is going uphill but it is a slippery slope and there area lot of heed winds,” he noted.
Colby said the near-term challenges for credit unions include rate shocks, cuts to non-interest income and rising compliance costs.
He said the prospect of higher interest rates is a threat to credit unions because of the interest-rate risk from new loans. In addition, they also could face problems because of the excessive concentration in certain kinds of investments.
Colby also said while the fight over debit interchange fees just ended and the results will hurt credit unions, there could be another fight on credit card interchange fees that could cause additional revenue losses.
He noted that the credit unions can expect an increasing regulatory burden because regulators are “well meaning people who don’t factor in unintended consequences.’’