ARLINGTON, Va. — Weaker gross domestic product growth in the third quarter indicates that the economy should slow to a sustainable pace while maintaining credit union lending.
"1.6%," NAFCU Senior Economist Jeff Taylor said of the third quarter GDP. "Pretty weak compared to the first half of the year. The thing that I thought was important about it was that consumer spending and business investment remain strong. That's 85% of the economy so I think that will allow for the economy not to slow too much."
Taylor said he expects the last quarter to edge back up to 3% and credit unions should expect 2.5-3% through next year. "That should bode pretty well for credit union loan demand although the economy remains susceptible to geopolitical risks that are out there," he said. Taylor also noted that income gains were strong for consumers and employment numbers were expected to rebound to around 130,000 jobs, up from 51,000 last month.
But the one dissenter to the Federal Open Market Committee's decision not to raise rates emphasizes the possibility of inflationary pressure and the need for another rate increase before year-end, the economist said. "There's still a dissension with President [Jeffrey] Lacker from Richmond and I still feel that he's right in the sense that core inflation's still building," Taylor said. "I think there's still a chance that they are going to continue to raise the rates a little bit. So credit unions can expect short-term interest rates to be nudged a little bit higher and the yield curve will remain flat for the next six to eight months and then if the economy continues to decelerate then we might have a cut next year."
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