MADISON, Wis. — The Credit Union Economics Group looked into its crystal ball and saw reduced economic and lending growth for the coming year.
CUEG, a nationwide group of credit union economists and other executives, blamed the slower growth on less favorable employment conditions and a slowdown in housing and new vehicle sales. CUEG members have revised 2007 numbers downward each of the past three quarters.
"We see consumers working off excesses of the past few years and engaging in some degree of personal balance sheet repair in the coming months," CUNA Mutual Group Chief Economist Dave Colby said.
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The economists also predicted that interest rates will drop next year, including 50 basis points in cuts to the Federal Reserve funds target rate. They also expect the yield curve to take on a steeper angle.
WesCorp Executive Vice President and Chief Information Officer Bob Burrell added, "In just the last two months though, based on what we see from our WesCorp members, it appears that liquidity is returning to the system. We are seeing a modest build up in member balances and our member borrowings are declining."
Share growth is expected to go up to around 5%, but remain low by historical standards. NAFCU Chief Economist Tun Wai noted that loan growth will have exceeded share growth for five consecutive years by the end of 2007, but the gap is closing. "The current pause by the Federal Open Market Committee should allow credit unions time to address long-term funding issues while remaining competitive on the lending side," he said.
Loan growth slowed significantly in 2006, which CUEG anticipates will continue to less than 7% through 2007. Kendrick Smith, vice president/CIO of Eastern Financial Florida Credit Union in Miramar, Fla., pointed out that many credit unions have already seen first mortgage origination volumes drop dramatically, along with vehicle lending. He added, "Many members are so credit challenged that even credit unions' sub-prime financing sources are turning a significant number of them away."
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