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NCUA's September Economic Update Posted
Thursday, September 26, 2013 5:35 AM

The National Credit Union Administration’s economic series has returned with an update from NCUA Chief Economist John Worth on recent economic trends and new economic resources available for credit unions. The video is available at www.youtube.com/user/NCUAchannel.

Worth points out that recent moderate economic growth and Federal Reserve statements prior to last Wednesday has put some upward pressure on interest rates, and these increases will likely become more pronounced as the rate environment evolves. Worth notes that recent interest rate increases are already starting to impact credit unions by pointing to two key developments.

First, the increase in interest rates during the second quarter reduced the market value of long-term, fixed-rate assets on credit unions’ balance sheets. This was reflected in total credit union unrealized gains dropping more than $3 billion in the second quarter. Unrealized gains of approximately $2.5 billion in the first quarter of 2013 turned into unrealized losses of more than $1 billion in the second quarter of 2013.

Second, rising mortgage rates are causing mortgage applications for refinancing to drop sharply. This may have an immediate impact on fee income at some credit unions and depress real-estate loan growth for the remainder of the year.

Additionally, Worth discusses how moderate improvement in the labor market has produced gains in consumer spending, particularly for new autos. For the year ending in the second quarter of 2013, new auto sales at credit unions were up 10.7 percent. That’s about twice as fast as other credit union loan categories. The rise in demand for new autos, aided by continued economic growth and an aging fleet, contributed to the recent growth in credit union loan portfolios.

The video also highlights the NCUA Quarterly U.S. Map Review, which provides a more in-depth look at key economic and credit union performance indicators at the state level.

NCUA’s economic update video series is an ideal resource for credit union board members, loan officers and management and is available on NCUA’s official YouTube channel.