General Session

Economic Update

After three consecutive years of external economic shocks with multidimensional effects on the U.S. economy the headwinds to the American economic outlook are gradually easing. The economy showed growth and resilience in the first half of the year amidst a very aggressive monetary tightening regime by the Federal Reserve. The surprisingly strong labor market is a key reason the economy has performed well in the face of the Fed’s contracting monetary policy. 

Even though we are foreseeing a modestly improved economic outlook, we project a more challenging view of credit union financial and operating results. The implications of a steeply inverted yield curve, which makes funding more costly for credit unions, coupled with very weak and expensive savings growth outpaced by stronger loan growth means that liquidity will continue to be an issue for many credit unions. A more marked deterioration of asset quality will also be reflected in increased loan provision, which coupled with compressed net interest margins will have an impact on credit unions’ bottom line.  
In this economic update, I will discuss how current economic conditions are shaping up the credit union financial and operating outlook, with a focus on our economic and credit union forecast, which looks at major macroeconomic trends and makes predictions of their implications on credit union financials.