MADISON, Wis.—A new forecast indicates that economic conditions will deteriorate through the end of the year but credit union performance should not be impacted by the slowdown.
CUNA’s latest quarterly economic forecast lowered its estimates for gross domestic product growth for the third and fourth quarters to 1.8% and 2.5% respectively. Previously, CUNA’s forecast called for 3% growth in both quarters.
For 2016, CUNA’s economists dropped their GDP forecast to 3% growth from 3.25%.
“Our headline inflation forecast for this year is now 1.25% compared with 1.5% previously,” the forecast said. “Our core inflation forecast for this year and next remains at 1.75%, with next year’s top-line estimate also holding at 1.75%.”
The forecast was prepared by Bill Hampel, CUNA chief policy officer; Mike Schenk, CUNA vice president of economic and statistics; and Perc Pineda, CUNA senior economist.
CUNA’s economic experts now expect the Federal Reserve will delay raising interest rates until the first quarter of next year, with interest rates reaching only 1% by the end of 2016. CUNA originally estimated rates would reach 1.75% by the close of 2016.
But CUNA sees credit unions weathering the economic slowdown, due in large part to membership and loan growth.
CUNA predicts that loan balances will climb by 11.2% in 2015 and by 10% in 2016, the forecast said.
“Loan growth this year will surpass impressive loan growth of last year,” the economists wrote. “As the economy continues to expand, we expect households to continue to release pent-up demand for autos, furniture and appliances over the next two years. New-auto loans, credit card loans and purchase mortgage loans will continue to be strong growth areas.”
CUNA also sees CU memberships rising by 3.9% due to more consumers understanding the credit union value proposition.