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Credit unions see drops in commercial, auto lending: Report

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Economic positives are outweighing headwinds, meaning credit unions should expect members to continue borrowing and spending through the rest of 2019.

That was the message in the most recent trends report from CUNA Mutual Group. Steven Rick, chief economist for the Madison, Wis.-based company, noted in the report that overall credit union loan growth has slowed some in 2019 compared to 2018, but he expects credit union loan balance growth to remain close to its long-term average of 7.2%.

The July report analyzed data from May. That month, the U.S. economy added 72,000 jobs, the unemployment rate remained at 3.6%, auto sales rose 6.1%, home prices rose 0.9% and the 10-year Treasury interest rate decreased 13 basis points to average 2.4%.

“Consumers are feeling confident this summer due to a number of positive economic factors,” according to the report, citing tightening labor markets, rising income expectations, low gas prices, record stock and home prices, low debt burdens, low interest rates, low inflation and rising wages. “This will keep credit union members borrowing and spending. Since consumer spending accounts for 70% of total economic activity, a confident consumer will keep economic growth above the 2.0% long-term average for the remainder of 2019.”

Credit union loan balances increased 0.6% in May, which was half the 1.2% growth rate for one year earlier. During the first five months of 2019, CU loan balances went up 1.5%, which was less than the 3.5% increase in the same period in 2018.

First mortgage lending was the strongest lending category, the report said. From May 2018 to May 2019, credit union first mortgage loan balances increased $26.7 billion. Other categories showed some slowing. New auto loan balances fell slightly in May and are down 1.2% in the first five months of 2019. Member business loans decreased by $7.9 billion year over year.

The delinquency rate on credit union loans was 0.52% in May, which was an improvement from the 0.64% reported in May 2018 and below the “natural” delinquency rate of 0.75%, according to the report.

As of May 31, the Credit Union National Association estimated there were 5,550 credit unions in operation in the United States. That figure was down six from the previous month. Year-over-year, the number of credit unions decreased by 172, which was less than the 231 lost in the 12 months ending May 2018.

Credit union memberships increased 0.31% in May, less than the 0.42% gain reported in May 2018. Aggregate memberships at credit unions topped 120 million for the first time.

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