Economic & Industry Update NAFCU Research Division. Curt Long, Chief Economist

Transcription

1 Economic & Industry Update NAFCU Research Division Curt Long, Chief Economist

2 Economic Growth 6% 4% 2% 0% -2% -4% -6% GDP GDI 6% 4% 2% 0% -2% -4% -6%

3 Business Sentiment Source: National Federation of Independent Business

4 Business Formation Percent New entrant share, BDS (left scale) Nbr of Startups, BFS (right scale) 000s, SAAR Sources: Business Dynamics Statistics (BDS) & Business Formation Statistics (BFS), U.S. Census Bureau

5 Tariffs Exports to China by State

6 Unemployment Measures 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% U-6 U-3

7 Weak Wage Growth Comparison with Previous Unemployment Troughs Date Unemployment Rate Wage Growth Core Inflation Dec % 6.5% 5.1% Oct % 6.0% 4.3% May % 7.9% 9.4% Mar % 4.2% 4.7% Apr % 3.9% 2.3% May % 4.1% 2.3% Jul % 2.7% 2.3%

8 Weak Wage Growth 170 Productivity vs. Wage Growth Real Wages Productivity Both series indexed to 100 in 1995

9 Weak Wage Growth 68% 66% 64% 62% 60% 58% 56% 54% 52% 50% Labor Share of Output

10 Consumers Consumer Confidence Source: U. of Michigan

11 Consumers 14% 12% 10% 8% 6% 4% 2% 0% Household Debt Service Payments as % of Disposable Income Mortgage Debt Consumer Debt 14% 12% 10% 8% 6% 4% 2% 0%

12 Consumers Loan Demand Net percent of lenders reporting stronger demand than previous quarter 2015 Q Q Q Q3 Mortgages* Auto Credit Card Other Consumer * GSE-eligible Source: Federal Reserve

13 Savings

14 Savings 100% 80% 60% 40% 20% Households' Ability to Cover Unforeseen $400 Expense 14% 14% 12% 12% 33% 32% 32% 29% 53% 54% 56% 59% Unable Other Means Cash or Equivalent 0% Source: Federal Reserve

15 Rising Inflation 3.5% 3.0% 2.5% 2.0% Expected 1.5% 1.0% Actual 0.5% 0.0% Notes: "Actual" shows year-over-year growth in core PCE inflation; "Expected" shows smoothed 10-year inflation expectations Sources: Commerce Department, Cleveland Fed

16 Interest Rates Percent FOMC's Fed Funds Rate Forecast Range Central Tendency Median Actual Longer Run Note: Central tendency removes the three highest and three lowest forecasts Source: FOMC "Summary of Economic Projections"

17 Note: Projection based on Federal Reserve Bank of New York s Projections for the SOMA Portfolio and Net Income (July 2017) $Billions 5,000 4,000 3,000 2,000 1,000 0 Federal Reserve Treasuries Mortgage-Backed Securities Agency Debt Other Fed Balance Sheet FRB-NY Projection $Billions 5,000 4,000 3,000 2,000 1,000 0

18 Interest Rates 5% 4% Term Spread 100% 80% Probability of Recession 12 months forward 3% 2% 10y - 3m 60% 40% 1% 0% 20% 0% 14% -1% Source: New York Fed

19 Interest Rates What Are Your Expectations for the Treasury Yield Curve over the Following Time Frames? Significantly steeper Somewhat steeper About the same Somewhat flatter Significantly flatter 1 year from now 2 years from now 5 years from now 0% 20% 40% 60% 80% 100% Source: NAFCU Economic & CU Monitor survey (Aug 2018)

20 Millions, SAAR Housing Home Sales Existing New 2.4% growth since mid-2015

21 000s, SAAR 2,500 2,000 1,500 1, Housing Home Construction Total units (left scale) Multifamily share, 3-mo. MA (right scale) 40% 30% 20% 10% 0%

22 Housing 100% 80% 60% 40% 20% 0% Share of Single-Family Builders Reporting Labor Cost/ Availability Problems 13% 30% 53% 61% 71% 78% 82% Source: National Association of Home Builders

23 Millions (SAAR) Millions (SAAR) Housing Vehicle Sales Seasonally Adjusted Annualized Rate Auto Light Trucks

24 Household FI Choice Households Top Reason Given for Selecting FI for Primary Checking Account (1998 vs. 2016) All Ages Ages 21 to Location 37.9% 40.4% 31.2% 35.7% Variety of Services Offered 13.9% 14.2% 9.5% 12.5% Rates/ Fees 16.1% 13.0% 21.1% 13.9% Safety/ Absence of Risk 0.2% 4.2% 2.1% 3.8% Customer Service 0.7% 0.9% 0.5% 1.0% Prefer Institution Type 0.1% 0.6% 0% 1.0% Source: Federal Reserve Survey of Consumer Finances

25 Household FI Choice Likelihood that Household Chooses CU, by Reason Given for Selecting FI (1998 vs. 2016) All Ages Ages 21 to Location 6.8% 9.8% 10.3% 11.8% Variety of Services Offered 21.7% 21.7% 27.1% 27.2% Rates/ Fees 25.9% 32.1% 30.8% 20.9% Safety/ Absence of Risk 8.8% 25.7% 14.3% 31.8% Customer Service 11.1% 19.2% 20.3% 23.0% Total 13.0% 17.2% 16.9% 17.2% Source: Federal Reserve Survey of Consumer Finances

26 Large vs Small CU Divergence Large CUs Small CUs 1% 0% -1% -2% Net Worth Ratio 0.5% 0.0% -0.5% ROA -3% -1.0% 1% 0% -1% -2% Net Interest Margin 2% Member Growth 1% 0% -1% -2%

27 Consolidation Trends 5% 4% 3% Average Annual Merger Rate by Asset Class % 1% 0% Under $100M $100M - $250M $250M+

28 Credit Union Lending Loan Growth (year-over-year) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2015 Q Q Q Q2 CC Auto Res. 1st Mort HELOC MBL/ Commercial

29 Liquidity 80% 70% 60% 50% Loans-to-Assets 6% 4% 2% 0% Borrowings + Non-Member Deps / Total Shares + Liabilities 20% 18% 16% 14% 12% 10% Cash + S-T Investments / Assets 10% 9% 8% 7% Jumbo CDs / Total Shares + Borrowings

30 Share Insurance Fund Use of TCCUSF Funds at 12/31/17 Distribution to CUs 24% Increase in SIF loss reserves 21% Increase in NOL to 1.39% 32% Refill SIF equity to prev. NOL (1.30%) 23%

31 Recap Economic growth likely to moderate, but still on solid footing Quarterly rate hikes through mid-2019; even flatter yield curve CU performance starting to be weighed down by declining loan demand, tighter liquidity conditions CU appeal is growing!

32 Economy Trade tensions Yield curve Inflation Industry Key Risks Liquidity Impact of taxi medallion loans on NCUSIF

33 Curt Long, Chief Economist NAFCU Research Division