Credit Union Savings Growth Cools
Members are feeling more confident about buying large-ticket items, so much so that credit union savings balances are trending toward a new low.
“We expect credit union savings balances to increase only 3.5% in 2014, the lowest since 2005, as credit union members loosen their purse strings and increase their purchases of durable goods (on) items that last three years or longer like cars, appliances and furniture,” Steve Rick, CUNA Mutual Group chief economist said.
In May, the latest month tracked in CUNA Mutual’s July Credit Union Trends Report, credit union savings balances rose 1%. That small increase pushed year-to-date savings growth up to 4.1%, and 3.7% year over year.
With low short-term market interest rates keeping credit union deposit dividend rates at record lows, members preferred to park their savings in liquid, short-term core deposits such as share drafts and regular shares in lieu of term deposits, according to Rick.
Over the last 12 months, share draft and regular share balances rose 8.6% and 7.6%, respectively, while longer-term share certificates and IRA balances fell negative 3.3% and negative 0.8%, respectively, the data showed.
While an improvement in the nation’s economy during the first six months of 2014 boosted credit union loan growth and improved credit union loan quality significantly, savings did not follow that trend.
Rick said monthly job creation averaged 231,000 in the first half of 2014, up from 204,000 in the first half of 2013 and 187,000 in the first half of 2012.
Job creation of more than 150,000 per month – the long-run growth rate of the labor force – is viewed by economists as necessary to lower the unemployment rate, the trends report noted. During the first six months of the year the unemployment rate fell from 6.7% to 6.1%.