<p>WASHINGTON – Credit union savings balances rose 15.7% for 2001, the biggest gain since the 22% increase in 1986, and are expected to increase by another 10% this year, according to CUNA. Savings balances were bolstered by a 37.6% increase in money market accounts last year. “There are other places consumers could put their money, but they are not as attractive as credit union money market accounts,” said CUNA Economist Mike Schenk. Money market mutual funds pay slightly higher interest, but they are not insured, he noted. Lending activity in 2001 rose 6.8% and CUNA is predicting a modest increase to 8.0% this year. Schenk said he expects an increase in second mortgage and home equity loans this year as the growth rate in overall mortgage lending contracts. Credit card loans, which showed a negative growth rate last year because of the high level of mortgage refinancing activity, are expected to increase between 3% and 5%. “We suggest loans will pick up a bit and savings growth will be down, but the relationship will be similar,” Schenk said. “Loan to savings ratios will come down a bit more.” The loan-to-savings ratio stood at 73.4% at the end of 2001, down from 79.5% at the end of 2000. The average capital-to-asset ratio declined to 10.9% in December 2001 from 11.4% at the end of the previous year. “The decline in the capital ratio is not all that significant,” Schenk said. “It is still near the record high of 11.4% at the end of 2000 and it came down because credit unions are growing very quickly.” Schenk said the CUNA forecast is based on an assessment that the economy is still weak and could turn down again if consumers stop spending. “People are saying we are out of the woods, but we are not out very far and we could take a hike back in,” he said. Nearly all the strength in the economy is still coming from the consumer quarter, he noted. Despite the 0.3% gain in fourth quarter economic growth as measured by the Gross Domestic Product, “business spending was dismal. Inventories are low, but capacity utilization is low, too, and there won’t be any increase in business spending until that turns around.” Capacity utilization figures show that producers are working far below capacity, he noted, and only a relatively large increase would cause them to start spending and hiring again. With consumer debt at an all-time high, Schenk warns of a “bubble in the debt market.” This could cause consumers to stop spending to make the kind of repair to their balance sheets that normally happens during a recession, not during a recovery. “Federal Reserve policy encouraged them not to repair their balance sheets and some see this as putting off the day of reckoning,” he said. CUNA released its yearly figures after adding the December numbers. Credit card activity, low for most of the year, rose by 3.5% in the December because of Christmas purchases. Home equity loans fell 0.7% and new auto loans outstanding dropped by 0.3%. Schenk said the December loan figures were normal for the last month of the year. “December is when most people are buying Christmas presents and they tend not to buy cars or houses,” he noted.</p>

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