WASHINGTON–CUNA’s economists are scrambling to adjust their forecasts to reflect the effect of the coronavirus pandemic on the U.S. economy, and expect to see a big drop in demand for auto and business loans this year from what was originally called for—although they still expect the numbers to be up.
One potential silver lining: CUNA is projecting strong mortgage volume may offset some of the other lending declines, although much of the forecast remains a big if depending on how long the stay-at-home orders remain in place.
Jordan van Rijn, senior economist with CUNA, said CUNA had already ratcheted up its projections for unemployment to rise to 6.5% prior to last week’s record 3.3-million jobless claims, a volume five times higher than any week during the Great Recession. He said he expects CUNA’s next forecast will be even higher.
Van Rijn said CUNA believes the economy is already in recession and will see a decrease in real GDP during the second quarter.
While other lending is going to lag, “There could be decent demand for mortgages given lower interest rates and refinancings, but we do expect a small drop off in mortgages going forward,” said van Rijn.
‘A Lot of Uncertainty’
Overall, van Rijn said CUNA expects loan and membership to be positive this year even as overall numbers will register a sharp decline. “There is a lot of uncertainty,” acknowledged van Rijn.
Van Rijn said CUNA will soon publish a new white paper updating its forecast as well as looking back on prior recessions.
“In 2007-09, credit unions were very resilient; only 60 credit unions failed and credit unions were much more resilient than banks,” said van Rijn. “Most credit unions, even the smaller ones, did quite well, and we expect most credit unions to be able to weather this storm as well. This could be deep, but also relatively short-lived.”
Van Rijn said CUNA will also be releasing an updated capital planning tool this week.