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Countering Declining Consumer Confidence

Consumer confidence took a hit in February. According to The Conference Board, the non-partisan nonprofit which administers the monthly Consumer Confidence Survey,  consumer confidence registered the largest monthly decline since August 2021. Reflecting the third consecutive month-on-month decline, consumer views of current labor market conditions weakened, consumers are pessimistic about future business conditions, and less optimistic about future income. Pessimism about future employment prospects worsened and reached a ten-month high. The University of Michigan monthly Consumer Sentiment Index reflected that consumers expect prices for goods will continue to rise and inflation will continue to hamper big-ticket purchases.

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When Not to Turn the Other Cheek

Credit unions continued to demonstrate resilience in navigating some of the challenges of the last quarter: income declined from the third quarter; provisions and actual charge-offs rose, but auto lending still weakened. Providing a snapshot of the overall industry, the nation’s Top 10 credit unions in the U.S. suffered a drop in ROA and higher-than-expected credit losses. While the Top 10 bolstered their provisions for the quarter, and charge-offs were smaller, delinquency rates rose, reflecting some potential cracks in the overall health of the economy.

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More Opportunities in 2025

Last month, I had a conversation with a credit union client where she expressed relief that 2024 was finally coming to an end. Truly, it’s been a tumultuous year for many financial sectors. While NCUA Q2 Quarterly Data Summary showed an increase in total assets, loans outstanding climbed and delinquency rates were up 21 basis points from 2023. Specific to auto loans, new files declined 4.3 percent and delinquency rates of existing loans increased 16 basis points. Experian put a finer point on the situation in their State of the Automotive Finance Market report stating that credit unions lost their lead in used car lending in the first quarter to banks, and credit unions’ share of new car financing also dwindled, falling further behind banks and captive lenders.