Page 9 - Michigan Credit Union League: 2018 Contact Q1
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4 REASONS TO EXPECT STRONG
LOAN GROWTH IN 2018:
CUs ARE INCREASING MARKET SHARE AS WELL
AS LOAN VOLUME
Despite some concerns about the percent in 2017 and rose 6.6 percent in the year ending
economy in 2018 — including rising June 2017.
market interest rates, worries over tax
reform, and the heightened potential At mid-year 2017, average home prices stood 14 percent
for trade war and geopolitical risks above pre-recession levels. Importantly, nearly 70 percent
— credit union loan portfolios are on of credit union households own a home.
track to grow more than 10 percent
for the fourth consecutive year. There is also good news on the liability side of the
consumer balance sheet. Household debt as a percent of
Mike Schenk More importantly, while there may be disposable income hit an all-time high of 130 percent
a bit of slowing in the overall rate of during the housing boom, but has trended down to 100
percent, a level last seen in 2002.
growth, continued healthy portfolio expansion seems a near
3. Continued Pent-Up Demand
certainty in 2018 as well. While spending and borrowing have been on the rise, it’s
abundantly clear that the choppy, uncertain nature of the
Here’s why: recovery, combined with an excruciatingly slow labor mar-
ket recovery will keep many consumers on the sidelines.
1. Robust Outlook for Jobs and Income
The U.S. unemployment rate finished August 2017 at 4.4 U.S. Bureau of Economic Analysis statistics indicate the
percent, down 0.5 percent compared to year-ago levels and average age of consumer durable goods remains close
well below the 10 percent cyclical peak in October 2009. to post-World War II highs.
The U-6 unemployment rate — which accounts for those The U.S. Department of Transportation reports the average
who have become discouraged, as well as those who age of passenger cars and light trucks has reached an
are working part time but want full-time work — finished all-time high of 11.6 years, up from 8.5 years in 1996
the month at 8.6 percent, which is more than one full and 9.9 years in 2006.
percentage point lower than its year-ago reading.
4. Affordable Credit
Most economists believe labor markets are now near full While the Federal Reserve has been raising its federal
employment. U.S. Bureau of Labor Statistics data shows funds interest rate target, the increases have been modest
the total number of job openings nationally is at an all- and manageable.
time high.
We expect the Fed to remain engaged, increasing market
In addition, median household income hit $59,000 in 2016, interest rates through the end of 2018. But the increases
a record high and a 3.2 percent jump compared to 2015. should be relatively small and, therefore, unlikely to choke
off demand in any significant way.
2. Healthy Consumer Balance Sheets
The value of household assets has been rising quickly. The Combine that with rising incomes, and the result suggests
stock market has hit all-time highs and current valuations strong borrowing in the future.
are well above pre-recession levels.
This article originally appeared on CUNA.org. Mike Schenk is
Housing, too, has been on a tear. According to the Federal CUNA’s vice president of research and policy analysis.
Housing Finance Agency, U.S. home prices were up 4.7
FIRST QUARTER 2018 I CONTACT 9
