WASHINGTON — Credit unions' year-to-date savings growth is the lowest economists at CUNA can recall.
"The number we've all been tracking with bated breath–credit union savings growth–put in a very disappointing month in July," CUNA Chief Economist Bill Hampel commented. "After a glimmer of hope in June when savings growth was actually positive, savings shrank nine-tenths of a percent in July. So the year to date growth is only 1.9%, which is really the lowest that we can recall since we've been tracking monthly data back in the 1970s, which suggests that either the consumer is on a spending binge or with high gas prices can't afford to do any saving or probably some combination of the two."
He added that the numbers could be slightly skewed since June ended on a Friday with the potential for an extra payday.
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Combined with loan growth remaining "half way decent" at nearly 5% for the year through July, the loan-to-share ratio hit about 81.8%. "If loans continue to outpace savings over the next several months the loan-savings ratio could reach levels we haven't seen since the 1960s and the 1970s," Hampel explained. "Not a problem for credit unions so long as they manage it but less liquidity sloshing around in the system than is normally the case. Coming off of five years of economic growth and really low interest rates and some unusual things in the economy, we're beginning to see some numbers in credit unions that we haven't seen for quite some time. They're fine with it; they can do well enough but it's different from what they're used to managing." Other mortgage loans lend the way at 3.6% growth in July followed by unsecured personal loans at 1.7%, credit cards at 1.6% and adjustable rate first mortgages at 1.1%. The other key categories were up as well. On the other hand, savings balances dropped 0.9% in July. Certificates were up 1.6%, but all other major categories decreased: regular shares, share drafts, and money market accounts were down 2.7%, 2.6%, and 1.6%, respectively.
Still credit unions capital-to-asset ratio was up from 11.1% in June to 11.3% in July and delinquencies were low at 0.7% for the month.
"We're in the early stages of a consumer-led economic slow-down," according to Hampel. "The consumer has been spending since 1991. Consumer spending didn't go negative during the last recession and it's about to. We've had a negative savings rate for the last 18 months, which means households have been spending more than their disposable income. That hasn't happened for more than a month or two as it has for the last 18 months since the mid-1930s. We think that was fueled largely by people finding that their homes we're doing the savings for them. Home prices were going up so much that net worth was increasing; they didn't need to save. With home prices leveling off we think that is going to reverse."
He continued, "The question now is 'is it going to slow enough to be a recession next year or not.' I don't think so, but that's not something we can really be precise at picking. We're just looking for a slower economy next year, which for credit unions will mean savings growth will come back and loan growth will slow." –[email protected]
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