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Business Lending Growth Should Remain Strong in 2019
Tuesday, November 6, 2018 6:45 AM

Mike Schenk, Deputy Chief Advocacy Officer for Policy Analysis and Chief Economist, CUNA

As with auto loans and mortgages, credit unions have routinely outperformed other financial institutions in business lending. This is reflected in a near tripling of market share of outstanding loans from 3.5 percent of depository small-business loans in 2007 to 9.7 percent in 2017.

Business lending growth should remain strong over the next year. The Small Business Optimism Index rose to 108.8 in August, easily beating market expectations and landing as the highest reading in the survey’s 45-year history. Other hopeful signs: The index set new records in terms of owners reporting “job creation plans” and “job openings.”

Areas of concern remain, however; the biggest has to do with tariffs and the potential for higher prices and related market disruptions.

Nearly all economists agree free trade is good for economic growth in the long-run. But trade disputes threaten the benefits of free trade. A recent National Association of Business Economists survey found that 90 percent of economists consider the “current tariffs and threats of tariffs as having unfavorable consequential impacts on the U.S. economy.”

The Tax Foundation estimates the cost to the U.S. economy of enacted and announced tariffs is a 0.6 percent reduction in long-run gross domestic product ($150 billion), a decline in wages of 0.4 percent, and a loss of 470,000 jobs.

To date, the negative economic effects of current trade disputes have largely been isolated to sectors directly hit by retaliatory tariffs (e.g., agricultural goods, American steel and aluminum, dairy, seafood, and alcohol), and to downstream industries such as auto manufacturing.

CUNA economists don’t expect the current trade disputes to have much of an impact on the overall number of people joining credit unions or on members’ behavior. And we’re not hearing from many credit unions about significant adverse impacts yet.

Read more at CUNA News.