Third quarter results released this week showed credit unionscontinued to increase their loans faster than savings, signalingtighter cash and creating loan-to-savings ratios not seen since thelast recession.

Steven Rick, CUNA Mutual Group's chief economist, said the trendwill continue next year, and could portend at least a slowing ofgrowth by the end of 2019. Mike Schenk, vice president of economicsand statistics at CUNA, said the trends appear to be driven by bigcredit unions deploying assets more efficiently. He sees no sign ofa recession.

CUNA Mutual Group's Credit Union Trends Report released this weekshowed credit unions' loan-to-savings ratio reached 82.1% inSeptember, and predicted it will reach 82.4% by December, thehighest ratio since the beginning of the Great Recession inDecember 2007.

“Loan-to-savings ratios peak right before recessions and maycontribute to the economic slowdown that follows due to tightliquidity from credit unions reducing their pace of lending andhigh levels of member's debt reducing their demand for loans,” thereport said.

As of Sept. 30, credit unions' surplus funds — cash plus assetsthat can be cashed within a year — were 26.9% of assets, down from29.4% a year ago. Credit unions held $962.4 billion in loans, 10.7%more than a year earlier, while savings grew 6.7% to $1.2 trillion.The trend is expected to continue next year.

“Credit union lending growth could slow slightly to 9.5% whilesavings balances increase only 6%. This will raise the averageloan-to-savings ratio to 85.1% at year's end 2018, the highestratio since May 1980,” the report said.

Rick; the CUNA Mutual economist, said the U.S. business cycle isamplified by the short-term credit cycle. During the last fouryears consumer loans from all institutions have been growing around6% to 7% “as consumers tap into future income by taking out a loanin order to boost their present day consumption.”

Consumer loan growth has recently slowed to 5.6% and is expectedto trend down during 2018, Rick said.

“We could see an economic slowdown by the end of 2019 or early2020 as the short-term credit cycle hits its nadir and consumersbegin to save more than they are borrowing,” he said.

CUNA is forecasting 2.3% GDP growth this year, and 2.5% in 2018.The 2018 forecast was upped in September from 2.3%. Economic newsfrom October into early November supported the belief that theUnited States remained in an “ongoing moderate expansion,” Schenksaid in CUNA's “Economic Update” for November.

“Economic growth will continue to accelerate modestly in 2018,”Schenk said. “Today's generally favorable economic conditionsshould prevail for the foreseeable future.”

Schenk said he doesn't use the loan-to-share ratio as arecession indicator, in part because it has peaked several times inthe past 30 years when no recession followed. He said the ratiodoes show cash is getting tighter, but a closer look shows that theculprits are big credit unions, which are well-equipped to manageliquidity. Only 25% of credit unions had ratios above 80% in June,but they represented nearly 60% of credit union assets.

“We see no systemic issue with credit union liquidity,” Schenkwrites in article to be published in the January edition of CUNA'sCredit Union Magazine. “Most credit unions have much moresophisticated liquidity management regimes than existed prior tothe economic downturn. And most have more access to a wider varietyof liquidity sources.”