A New Year, A New Outlook…A New Mindset?

Reports on two bellwethers of the U.S. economy were released last week, each indicating that the worst of the economic downturn is behind us.

 
 

Reports on two bellwethers of the U.S. economy were released last week, each indicating that the worst of the economic downturn is behind us. GE, long considered a proxy for the economy due to its breadth of operations, released fourth quarter earnings on Friday. While earnings were down versus a year ago, the company believes positive growth is ahead in 2010 with the Wall Street Journal characterizing the release with "GE's Chief Immelt Says Worst is Over". Of particular note is Immelt's comments regarding GE Capital, which has been a drag on the company’s earnings due to losses in its consumer, business and commercial real estate lending. According to Immelt, "Our delinquencies have stabilized. The world we are looking at has improved." See the company's press release and Wall Street Journal's coverage (subscription required) for more information.

In another report, California's inventory of unsold homes reached 3.8 months in December, the lowest level since 2005. This compares to a high of 16.6 months in January 2008 and a historical average of approximately 8 months. In addition, the median home price in California has risen 10 straight months and some are describing it an "auction market" rather than "house sales" due to the quick turnover of recent listings. Although some are concerned that inventory is understated because would-be home sellers are holding back until they believe the economy has returned to 'normal', it seems clear that the worst is over for California housing. As the largest housing market in the country, it is an important sign of further economic stabilization.

What do these reports mean for credit unions? The crisis is over. While some institutions may still have concerns, the environment is improving. Anecdotally, our conversations with California credit unions, among those hit hardest by the economic downturn, indicate many are projecting better results for this year and a return to positive net income. Moving beyond a 'crisis mentality' to a forward-looking plan will be critical to the industry’s success in 2010.

 
 

Jan. 25, 2010


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