The third and final estimate for GDP growth during the second quarter was left unchanged at a 2.5 percent annualized rate. This compares to first quarter’s pace of 1.1 percent. The Commerce Department reports an upward revision in domestic sales offset a $6 billion downward revision in business investment.
Annualized economic growth continues to trod along at a 1.8 percent pace, slightly below 2012 but comparable to 2011’s growth rate. It is expected to increase to about 2.2 percent during the second half of 2013 and advance by 2.8 percent in 2014.
The news on economic growth and personal spending (increasing by 3.2 percent, while personal income increased 3.7 percent over the past 12 months) demonstrates the frailty of the recovery, according to Brian Turner, director and chief strategist with Catalyst Strategic Solutions.
Weak to moderate growth in consumer spending (two-thirds of the nation’s GDP) has a direct impact on credit union loan growth, particularly on consumer loans.
“When members continue to worry about their job security, they become hesitant to open their wallets, especially on big ticket items such as homes, automobiles and appliances – all items for which credit unions extend financing,” notes Turner.
The Fed’s consumer spending gauge increased at a 1.3 percent pace in 2013 and is expected to increase 1.7 percent next year. While not a significant increase, it does support the 2.8 percent growth expectation in GDP for 2014.
“This would imply a moderate increase in consumer loan growth next year,” adds Turner.
New home sales reportedly increased 8.0 percent in August, while pending home sales fell by 1.6 percent.
“The report on home prices is welcome news on many fronts,” continues Turner. “It has a positive impact on members’ household wealth, which will affect future spending behavior. It also affects credit union loan portfolios by narrowing any gap between the amount due on a mortgage versus the market value of the collateral. This in turn could reduce loan loss allowance that is attributable to members who are ‘underwater’ with their loan (owe more on the mortgage than the value of the home).”