It might be here.

Chuck Fagan, president and CEO at PSCU, told Karen Webster that depending on where one looks, a recession looms or already is entrenched.

The housing market very likely is in a recession he said, as mortgage buying is drying up in the wake of aggressive Fed rate hikes.

“And,” he told Webster, “the housing market is a leading indicator of what’s going on with the economy.”

With that said, at least in the credit markets and within financial services, things have held up pretty well, he said — as measured in the first half of 2022. Consumers, he said, have shifted from using debit to using credit, after having used available funds (and stimulus payments) to pay down debt. In many cases, these same consumers may be trying to keep their current nest eggs intact.

Some Indications of Resilience

There are at least some indications that tailwinds to consumer spending remain in place, even with above 8% inflation firmly entrenched.

The labor market is still tight, so the employment picture is still bright. Gas prices are coming down, which can help spur consumers to spend at least some of their proverbial dry powder. That sanguine attitude comes even though, as PYMNTS data has found, individuals expect the inflationary environment to last more than two years before returning to more normalized levels.

“I’m hopeful, as we head toward the holiday season, that there is some confidence on the part of the consumer,” said Fagan.

Credit unions (CUs), at this critical juncture, will be able to bring consumers and local businesses together, cementing ties within the community, to the benefit of all stakeholders.

As individuals continue to take stock of their financial wellness, credit unions have an opportunity to continue to engage with those members and help them manage the challenges of daily financial life, as some expenses outstrip wage growth. Those challenges will include navigating higher home heating costs this winter, to name just one example. Even if prices do come down, he said, it will be quite a long time before they reach levels seen even as recently as last year.

We may start to see car prices decline (though they are highly elevated). Larger retailers will be able to leverage scale to reduce prices, predicted Fagan, and small and medium-sized businesses (SMBs) may cut some prices to move inventory. Credit unions also can leverage technology to create banking services for SMBs that meet their needs. It’s a truism that for any small business, cash flow is king, and we’re headed toward the age when faster and real-time payments will be ubiquitous. Again, the advantage here goes to larger merchants, who have scale and breadth of customer base to leverage faster payments up and down supply chains.

There’s a greenfield opportunity for these same CUs to help their small business members get the funds in hand they need to make investments in technology to run more efficiently and protect margins as their brick-and-mortar locations run smoothly.

That includes self-checkout, newly installed at some of those mom-and-pop locations. Technology, he said, allows workflows to be reimagined, and to help move consumers to be a bit more inclined to embrace self-service models.

“We can help enable some of the automation that helps to create a better experience for the consumer,” said Fagan. “There needs to be a much greater emphasis on efficiency.”

New PYMNTS Study: How Consumers Use Digital Banks

A PYMNTS survey of 2,124 US consumers shows that while two-thirds of consumers have used FinTechs for some aspect of banking services, just 9.3% call them their primary bank.

We’re always on the lookout for opportunities to partner with innovators and disruptors.

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