Trends Report: Inflation could stay around longer than expected

In its October 2021 Credit Union Trends Report based on data from August, CUNA Mutual Group reported that the rapid growth rate in the nation’s money supply could keep inflation around longer than expected.

The nation’s money supply has experienced the fastest growth rate in modern history, the report states. The money supply — currency, checking deposits, savings deposits, money market deposit accounts and certificates of deposit — closely resembles the deposit products offered by many credit unions to their members.

During the past 18 months, the nation’s money supply and credit union deposits grew over 20%, but output increased less than 3%. “In other words, credit union members and Americans, in general, are flush with cash but don’t have additional goods and services to spend it on,” according to the report.

In addition, during the past 12 months, credit union loan balances increased 5.5%, slightly slower than the 6.6% pace set in the year ending August 2020 and below the 7% long-run credit union average loan growth.

Home prices rose 1.3% in August from July, according to the Core Logic Home Price Index, and 18.1% year-over-year. This is the fastest annual growth ever recorded going back over 40 years.

The report also found that:

  • credit union consumer installment credit loan balances (auto, credit card and other unsecured loans) rose 1.1%;
  • vehicle sales fell in July to a 12.2 million unit seasonally adjusted, annualized sales rate, which is down 25.2% from July 2020 when 16.3 million units were sold;
  • credit union fixed-rate, first mortgage loan balances grew 1.4% in August, faster than the 1% pace reported in August 2020;
  • credit union savings balances rose 0.1% in August, below the 0.3% rise in balances reported in August 2020;
  • credit union provisions for loan losses, as a percent of assets, fell to a record low of 0.07% in the first half of 2021; and
  • credit union memberships rose by 261,000 in August, or 0.2%, below the 516,000 new members, or 0.4%, added in August 2020.

The Credit Union Trends Report is a monthly “pulse check” on the state of the credit union marketplace, often placed in a historical context. The report includes data from two months prior and is published and distributed by Steven Rick, chief economist for CUNA Mutual Group. The Trends Report is intended to provide a review and analysis of recent credit union financial performance and operational results in the context of recent economic activity. Data and analysis are provided to establish standards against which credit unions’ own performance can be compared.

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