Trends Report: Barring any ‘black swan’ event, no recession expected in next five years

In its January 2022 Credit Union Trends Report based on data from November, CUNA Mutual Group reported that no recession is expected during the next five years unless the global economy is impacted by a major “black swan” event — wars, new pandemics, meteor strikes, etc.

The Federal Reserve is expected to raise interest rates to end inflationary pressure this year, and the question on the mind of many credit union leaders is when the next recession may take place, the report stated.

With no recession expected for the next five years and therefore less economic uncertainty, many businesses will decide to increase spending on capital investment and many households will decide to build new homes, keeping the growth rates above the 2% trend, the report stated.

“During the pandemic, a dramatic shift occurred in the composition of household spending, where the amount spent on services declined while spending on goods increased,” according to the report. “Over the next few years, as we transition from a COVID pandemic to an endemic, consumer spending will transition back towards the pre-pandemic trend of higher spending on services. This trend was mainly driven by an aging population demanding additional healthcare services.”

The report also found that:

  • credit union loan balances rose 0.7% in November, above the 0.2% pace reported in November 2020;
  • credit union consumer installment credit balances rose 1.1% in November, above the 0.2% decrease set in November 2020, as consumer spending surged in the fourth quarter of 2021;
  • credit union new auto loan balances fell at a -4.7% seasonally adjusted annual rate in November, significantly below the double-digit pace set during 2012–2018;
  • Credit union fixed-rate first mortgage loan balances grew 1.3% in November, above the 0.9% pace set in November 2020;
  • existing home sales rose 1.9% in November from October, but marked a 2% decline over the last year due to slightly rising interest rates;
  • fixed-rate mortgage loan balances are currently growing at a robust 17.8% seasonally-adjusted annualized growth rate;
  • credit union members have an average of $2,697 more in their savings balances today compared to two years ago, a 25% increase;
  • the credit union loan delinquency rate rose to 0.49% in November from 0.48% in October;
  • during the last 12 months, credit union memberships rose 3.9%; and
  • total credit union memberships reached 131.5 million in November, 4.927 million more than November 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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