What credit union leaders need to know about shifting member behavior and economic uncertainty
Consumer confidence is faltering at a pace we’ve not experienced in years. The latest WalletHub Economic Index found that consumers feel 27% less confident about their financial outlook this month than they did one year ago. This is the sharpest yearly drop in consumer confidence recorded since December 2020 and puts sentiment at its fifth-lowest point in the past five years.
“The 27% decrease in consumer sentiment over the past year is a worrying sign that our economic recovery may be stalling, and it demonstrates that people are not optimistic about their financial future,” WalletHub Analyst Chip Lupo said. “People who have low financial confidence are likely to spend less money, make fewer large purchases, and pay down less debt than people with high confidence. As a result, when consumer sentiment experiences a significant decrease, that is negative for the economy.”
5 Critical Data Points for Credit Unions
Additionally, here are some data points from the WalletHub survey that credit union leaders must know:
- The share of consumers expecting to buy a car in the next six months is more than 32% lower than the previous month.
- Interest in buying a home fell by nearly 30%, the largest decline since December 2020.
- The likelihood of large purchases in the next six months is nearly 22% lower.
- Confidence in job security declined more than 16%.
- Optimism about financial improvement in the next six months is almost 14% lower.
As you can see, members likely will be avoiding large purchases and new debt.
What’s Driving the Decline?
“Uncertainty is the primary driver behind the decline in consumer confidence,” H. Shelton Weeks, Professor at Florida Gulf Coast University, explained in a statement. “The debate surrounding the administration’s trade war has had a chilling impact on the economic outlook of consumers.”
Dr. Kimberly A. Gaither, Provost at Culver-Stockton College, agreed. She added “The current political situation makes it difficult to predict decisions which are being made and thus predict the consequences of those decisions…The cost of those goods in the future is very uncertain.”
What Credit Unions Can Do
In this environment, credit unions are uniquely positioned to provide clarity, reassurance and practical guidance to members.
“The main thing is to not panic,” Weeks advised.
Reassure members as you guide them through this rocky financial terrain. Credit unions might even expect increased deposits, as members chose the flight to safety over the markets, which we’ve seen in the past.
These are the times credit unions are made for. Double down on financial wellness efforts. Keep a close eye on loan demand and delinquency risk. Position your credit union as a steady, trustworthy guide for your members. Consumer confidence in the economy may be low, but confidence in their credit unions will be high.