Outstanding loan balances at credit unions increased 0.5% in themonth of May, according to CUNA's monthly estimates report releasedMonday.

However, the big news so far this year according to ChiefEconomist Bill Hampel is that 2013 loan growth is expanding beyondfirst mortgage loans, which have been responsible for bulk ofpost-recession lending to date.

Overall, loans have grown 2.8% during 2013 through May 31,according to the report which is based upon credit union sampling.More than half of that figure – 1.5% – has been in firstmortgages.

However, new auto loan balances have increased 1%, and unsecured personalloans and credit cards have grown 0.8%. Used auto loans outstandinghave increased 0.2%, while home equity lending has declined 0.5%year-to-date.

NAFCU's most recent member survey also shows lending on therise, with its members reporting 7.16% loan growth in April 2013over the previous year. However, NAFCU members reported loan gainsin different categories. The report shows a big increase in usedauto loans – 0.74% in April – but a decrease of 0.26% in new autoloans.

And, while NAFCU member credit unions surveyed reported anuptick of 0.05% in credit card balances in May, first mortgagesdeclined from the previous month by 0.37%.

David Carrier, NAFCU's chief economist, agreed with Hampel thateconomic indicators seem favorable for loan growth this year.However, Carrier cautioned that he's concerned about the impact thefederal sequester spending cuts will have on the economy, as roughly680,000 military civilian workers begin one-day-a-week furloughsthis month that will reduce their take home pay by 20%.

“The economy seems to be rebounding, the housing sectors aredoing well, but I can't say what the impact of the sequester cutswill be during the second half of the year,” the NAFCU economistsaid. “There's a downside risk here we have to worry about.”

Those cuts to defense paychecks could have a big effect oncredit unions, because the nation's largest and third largestcredit unions, the $54 billion Navy FCU and $16 billion PentagonFCU, serve the military as their primary field of membership.

“The first wave of the sequester cuts hits contractors, thesecond wave would be the furlough of federal employees, and thethird wave would be layoffs,” Carrier said. “I'm worried about theimpact of all three.”