CU Economists See Rainbow for 2004, Beyond Recent Years' Clouds

WASHINGTON-The economy is preparing to bust out of its two-plus-year slump and move steadily in an upward direction, credit union economists are forecasting. Credit unions need to prepare for this scenario, members of the Credit Union Economics Group said on a call with reporters. “I think all of us believe there will be improved job creation over the next six to nine months and firming up,” CUNA Mutual Assistant VP and Corporate Economist and CUEG member Dave Colby said. “So, I guess, to put it in a nutshell, we’re increasingly optimistic, but somewhat guarded yet. We haven’t seen the major changes in our member behavior away from continuing to put a lot of money in their credit union seeking safe haven.” Colby added that the 7% growth demonstrated in the third quarter bumps his previous forecasts up a little and said he was particularly impressed with recent business investment numbers. NAFCU Staff Economist Jeff Taylor said, “There’s a good chance this economy will have sufficient momentum to continue well into next year.” He explained that even though there is some pessimism toward consumer spending, capital investments and inventories are looking very promising. Though the refinancing boom will surely come to an end, on the positive side, consumers have gone out and spent their savings to help spur the economy. “I think that one question mark is what’s going to happen in the mortgage loan arena?” Vystar CU Executive Vice President and CFO Scott Mainwaring predicted. Credit unions will need to unload their fixed-rate mortgages relatively shortly, he said. Selling to the secondary mortgage market takes two to three weeks with a system already in place, he said, but a credit union new to the secondary market could take three to six months to prepare a package for sale. “Overall, lending rates are really going to depend on relative interest rate levels and how much credit unions decide to rebalance their balance sheets and sell some of their fixed-rate first mortgage holdings. But I’m optimistic that we’re going to see the traditional, short-term, installment credit grow and improve over the next year, year-and-a-half,” Colby predicted. Separately, CUNA Economist Bill Hampel provided similar good news recently. “It’s particularly interesting this time because, last week, we also heard that the economy seems to have finally broken out of the doldrums in the third quarter of this year. It grew at a little over 7%, which suggests we’re going to have strong growth through the next year,” he said in line with Taylor’s remarks. In September, savings at credit unions were down 0.7% and loans rose 1.0%, according to Hampel. Loans at credit unions grew at an annual rate of 15% in the third quarter and savings only a 3% annual rate, “which suggests that credit union balance sheets also showed that consumers are getting a little bit more into the economy.” Hampel concluded, “I think that for the rest of next year, this means that we are going to see stronger loan growth for credit unions in general next year, than we’ve seen for the last several years.” [email protected]