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CUs will be Challenged to Replicate 2013 Growth Rates Without Experiencing Sizeable Increase in Consumer Loans, Turner Says
Tuesday, January 21, 2014 6:55 AM

The Labor Department reported consumer inflation increased 0.3 percent in December following no change in November. Over the past 12 months, consumer inflation has increased 1.5 percent.

Higher energy and shelter prices were major factors in December’s increase, with gasoline prices rising 3.1 percent and housing costs advancing 0.2 percent. Food prices rose 0.1 percent last month – the first monthly increase in four months – as a sharp drop in fruit and vegetable prices offset other increases.

Excluding food and energy prices, core consumer inflation rose 0.1 percent in December, after a 0.2 percent advance in November. The 1.5 percent increase in 2013 compares to a 1.7 percent increase in 2012. Both rates are well below the 2.4 percent average annual increase over the past 10 years. It also marks the first time that consumer inflation has increased less than 2 percent for two consecutive years since 1997-98.

Brian Turner, director and chief strategist with Catalyst Strategic Solutions, says the increase in the consumer price index is a welcome sign for the economy.

“The current 1.5 percent annualized pace increases the dollar contribution to GDP growth and it remains well under the pace that would further impede consumer spending,” notes Turner. “It should not have an adverse impact on members’ disposable income, which will support further share growth.”

Unfortunately, the current inflation rate is having little impact on consumer spending, as members remain on the sideline and elect to tighten their belts.

“Initial reports show credit union industry loan growth approached 7.5 percent in 2013, a nice increase over the 4.6 percent growth rate in 2012,” adds Turner. “A 10.5 percent increase in loans at the industry’s larger credit unions ($500 million in assets) contributed most of the gain.”

With the expected decline in mortgage originations during 2014, Turner says credit unions will be challenged to replicate 2013 growth rates without experiencing a sizeable increase in consumer loans.

“A very fragile consumer spending outlook may impede that outcome,” adds Turner.