WASHINGTON—After the failure of some banks, it’s not only demand for loans that is going to be impacted, but supply of credit is also going to be tight this year, CUNA Senior Economist Dawit Kebede forecast in his May 2023 CUNA Economic Update.
“Standards are tightening and demand is also falling for commercial, industrial and household loans," he said.
According to CUNA, highlights from the most recent update include:
- Economic growth: CUNA economists forecast that the economy will increase by 1% this year and 1.5% next year
- Inflation is slowing down but remains elevated above the Federal Reserve’s target
- Labor demand is still strong but declining compared to previous months
Savings Growth Projection
Kebede said he expects credit union savings growth to be 4% this year and 5% next year, while loan growth will slow down relative to last year, but will remain close to the long-run growth trend.
Liquidity will tighten further in 2023 with the loan-to-savings ratio rising by another 2.8 percentage points to 84.3% by year-end.
Inflation Forecast
“We are forecasting inflation would continue to slow down and probably reach 3.5% by the end of the year. Still, above the Fed’s target of 2%, but maybe next year it will come down to where the Federal Reserve wants it to be. In the process, the unemployment rate would trend up a little bit to 4% and that's also consistent with prices coming down … That’s our forecast for year-end. No other further increases coming this year and probably when inflation starts to go down next year rates will start to go down," he said.
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