ONTARIO, Calif.–The level of household “savings” in checking as well as other combined deposit accounts across the state has hit its highest levels ever at credit unions, rocketing up 35% from pre-pandemic Q2 2019 to Q2 2021, according to new data from the California and Nevada CU Leagues.
In releasing the data, the leagues said the trend “represents an unprecedented two-year increase” as seen in its California Credit Union Industry Snapshot.
According to the Snapshot, collectively, deposits made by 13.1 million California credit union members rose to $233-billion from $172 billionduring the June 2019 to June 2021 period at 286 Golden State-based credit unions, “a statistically significant barometer of local banking activity,” the league said.
“No other two-year period in recent history has experienced such a boost in California credit union deposits by members and households to the tune of a net-positive $61 billion (35% growth),” the leagues added.
Reasons For Increase
According to the leagues, while it’s true that more California residents are choosing to bank at credit unions and become members, “that’s not the complete story.”
Dr. Robert Eyler, contract economist for the California CU League, said in a statement that today’s higher-savings trend this far into an economic recovery that technically started around early summer of 2020 is likely most recently due to consumers traveling less from COVID-19 restrictions and a simultaneous decrease in other purchases because of pandemic issues.
“For some workers, continued uncertainty about job stability and the economy’s direction are also fueling this ‘savings’ tendency,” the leagues said. “Meanwhile, as workers entered the COVID-19 crisis point and came out the other side, their increased deposits have built a financial cushion as local economies and businesses navigate heavy churn, dislocation, repair and renewed hiring needs within the job market, as well as employee decisions amid the so-called ‘Great Resignation.’”
Risks from Inflation
The leagues noted, however, that recent price inflation on goods and services could erode some of these households’ savings for the time being. It remains to be seen whether higher inflation trends will normalize sooner versus later, the league analysis added.
“If inflation remains relatively high through 2022 and interest rates on deposits begin to react to that increase, households’ savings may move toward higher interest-bearing accounts,” Eyler said. “But most economists are forecasting a moderation of inflation pressures as global supply chains and post-pandemic consumer demand settle into patterns reflecting less concerns about COVID-19 conditions.”
Regional Performance
The leagues said that in California, credit union members (individual consumers), total loans, and total deposits either remained-at or reached record highs by June 30, 2021 compared to the year-ago period — 13.1 million members (consumers), $147 billion in loans, and $233 billion in deposits.
The league analysis offers breakout performance by 10 local regions: Bay Area, California, Central Coast, Central Valley, Greater Napa Valley, Northern California, Sacramento County, San Diego Region, Southern California, and Ventura County.