Credit unions have started 2018 with continued growth, mirroringthe economy, but CUNA economists are watching President Trump'stariff declarations to see what damage they might do.

In CUNA's “Economic Update” video released March 19, CUNAeconomist Mike Schenk said he expected credit unions to stay on acourse of buoyant growth.

“The U.S. economy is in good shape overall, and the on-goingexpansion should continue for the foreseeable future,” Schenksaid.

However, much as he did 11 months ago, Schenk said progresscould be derailed if protectionist policies lead to a tradewar.

Economists from CUNA and CUNA Mutual Group will meet early next week andexpect to release a forecast as early as Tuesday on trends forcredit unions and the broader economy.

“In general, I don't think our view has changed much since wedid that video,” Schenk said in a telephone interview Thursday.

“In general, financial markets tend to overreact in the shortterm to developments, and that's exactly what happened,” he said.“Things have sort of settled down since that time.”

In the video, Schenk cited reports that support optimism,including gross domestic product growth at annual 2.5% rate in thefourth quarter (since revised upward to 2.9%), following a“healthy” 3.2% rate in the third quarter. Also, consumer spendingin the fourth quarter grew at a “very strong” 3.8% annual rate, anddurable goods spending was rising at a 13.8% annual rate.

“That's a sure sign that consumers are in the game, confident,and looking for credit to finance their big-ticket purchases: goodnews for credit unions,” Schenk said in the video.

“Although the (Trump) administration aims for annual growthin the range of 3% to 4%, most economists expect GDP to grow atabout 2% to 2.5% in a modern-day, healthy U.S. economy withrelatively low population growth and moderate productivitygrowth.”

Job demand is strong; wages are gaining, but not enough to sparkinflation.

“We're extremely concerned about increasing calls for tradetariffs and the possibility of trade war. “And judging from recentequity market swings, others share our concern.”

Three days later, Trump announced punitive tariffs againstChina, and the stock market dove again. The Dow Jones IndustrialAverage fell to its lowest point since last November.

“Increasing protectionism is particularly harmful to economicgrowth. It increases prices, lowers efficiency and can result insignificant job losses,” Schenk said in the video.

“Of course, many of our trading partners have threatenedretaliation. Industry leaders are concerned. In the end, we believetariffs will be limited and largely symbolic and that the policyultimately adopted will exclude a number of our key tradingpartners.

“If we're right, then our baseline forecast seems to beappropriate,” he said. “If we're wrong, and policies are farreaching, then we'll more than likely downgrade the outlook—perhapssignificantly.”

CUNA Mutual Group's Credit Union Trends Report shows January loanportfolios following last year's trends with total loans at $992.6billion as of Jan. 31, up 10.9%, with growth in car loans farexceeding real estate.

Although the loan-to-savings ratio has reached a record 84.4%,up from 80.8% in January 2017.

Yet CUNA Mutual said further loan growth is still possiblebecause credit unions are attracting new members at a rateexceeding 3% a year for the past three years, compared with 1%annual membership growth in 2004-2005, the last time loan growthexceeded 10%.

“Credit unions today can increase loan balances not only withexisting members, but also with many new members discovering forthe first time all of the quality financial products and servicesof a full-service, modern-day credit union.”

The Trends Report also showed that in January:

• New car loans grew 14.1% to $137.2 billion.
• Used car loans grew 12.4% to $209.9 billion.
• Credit card balances grew 8.5% to $57.6 billion.
• First-lien mortgages grew 9.3% to $397.6 billion.
• Second-lien mortgages grew 8.1% to $85.1 billion.
• Member business loans grew 18.2% to $80.8 billion.