CUNA Releases September Economic Update

CUNA Senior Economist Ligia Vado delves into the scale of the potential effect the lift of student loan forbearance can have on credit union asset quality performance in this month’s CUNA Economic Update. Vado also showcased a couple of initiatives that help credit unions to strategically market and service the Hispanic and Latino market in the U.S. to commemorate National Hispanic Heritage Month. 

Highlights include: 

• Scale effect of forbearance lift: CUNA’s analysis indicates that the vulnerability of credit union loan performance to student loan repayment shocks is generally modest.  Among credit union mortgage, auto and credit card borrowers, only about 17% on average also have student loans with any financial institutions.   

• Loan performance: CUNA’s baseline forecast for delinquency rates and net charge offs is 0.80% and 0.60%, respectively. These projections put both asset quality ratios close to their long-run average rates, and reflect more of a reversion to long-term asset quality than any significant shock from student loan borrowers.   

• Latino buying power: If the Hispanic community in the U.S. was its own country, it would place fifth in the top ten countries with the largest GDP in the world, said Vado. One in three Latinos is currently in the prime home buying years (ages 25-44). 

“Two complementary initiatives in the credit union movement focus on helping credit unions to reach and better serve the Latinx market: Coopera’s Hispanic Outreach Program (HOP) and Inclusiv’s Juntos Avanzamos, which means ‘Together we Advance.’ HOP offers credit unions a holistic approach to inclusion … The Juntos Avanzamos designation is a framework provided nationally by Inclusive, which encompasses guidelines to help credit unions.” – Ligia Vado  

Vado's research using Equifax analytics data sets shows: 

• 14% of credit union members with a credit union mortgage also have a student loan with any financial institution.

• 15% of credit union members with a credit union second-lien mortgage also have a student loan with any financial institution.

• 21% of credit union members with a credit union auto loan also have a student loan with any financial institution.

• 16% of credit union members with a credit union credit card also have a student loan with any financial institution.

• 19% of credit union members with other credit union consumer loans also have a student loan with any financial institution.

Notable CUNA research on the effect of the adoption of Coopera’s and Inclusiv programs on credit union performance found: 

• Credit unions that joined HOP grew their membership 33% more than credit unions that did not.  

• Credit unions that received the Juntos Avanzamos designation grew their membership 28.1% more than credit unions that did not.

   

CUNA Economics: Headline inflation remained unchanged

CUNA Senior Economist Dawit Kebede, PhD, issued the following statement in response to the Labor Department’s September Consumer Price Index Report:   

“Headline inflation remained unchanged in September at 3.7% over the last 12 months, the same increase as in August. Core inflation, which excludes volatile food and energy items, decreased from 4.3% in August down to 4.1%. The index for services contributed the most to the monthly increase, followed by energy, and food items. On the other hand, the index for goods continued its decline for the fourth consecutive month.  

“Housing inflation increased in September to 0.6% from 0.3% in August, accounting for half of the increase of the monthly headline inflation. This is unexpected, as the impact of shelter on the overall inflation was anticipated to be muted at this time after showing declining trends in the past few months. Shelter is a lagged indicator in the inflation report, and some of the declines in housing prices observed early in the year are not yet reflected.  

“The declining core inflation indicates that prices are moving toward the Federal Reserve's target. The annualized core inflation rate for the last three months is now less than 3%. This coupled with declining wage growth and recent increases in bond yields, suggest that the Federal Reserve may not need more rate hikes to control prices.”