RALEIGH, NC (February 25, 2014 )– With the 2013 calendar year recently ended, reviewing trends in the market can inform expectations and planning for the current year. A whitepaper just released by Sageworks examines how key aspects of the U.S. economy fared last year and reviews important trends in the banking industry that will shape 2014.
It is no secret that the banking industry moves as the economy moves. Improving credit quality and loan growth are positive trends for banks but unless the economy can continue to strengthen as well, the industry will struggle to improve profitability. The labor market, in particular, will likely drive monetary policy that could sustain low rates and pressure on net interest margins for banks in 2014. It is also important to look at what forecasters see for the economy in the coming year as well as the outlook for banks.
The Fed’s Fourth Quarter Survey of Professional Forecasters calls for continued steady growth in GDP and a healthier labor market next year. The 42 forecasters surveyed expect GDP growth of 2.6 percent in 2014 with unemployment continuing to hover around 7.0 percent, moving to 6.4 percent by the end of 2015.
These factors, along with the continued expectation of low inflation, will influence interest rates and the possibility that the Federal Reserve will work to keep rates low through the next year. As the Fed’s efforts primarily tend to affect shorter-term rates more than longer term, rates could continue to rise on the longer end of the yield curve in 2014.
The year ahead looks brighter for both the economy and banking industry than we’ve seen in recent years, but many potential challenges remain. The labor market in particular will need to continue to strengthen to bolster consumer spending and the economy as a whole. As bankers look forward, there are ongoing challenges to overcome. There is hope, though, that the rising tide of the economy will help raise the industry to stronger performance and profitability in the coming year.
To learn more about 2013 trends and lessons learned, interest rate and economic changes, or lending prospects for next year, download the full whitepaper here.
About Sageworks
Raleigh, N.C.-based Sageworks is a financial information company. Sageworks’ data and applications are used by thousands of financial professionals across North America to analyze privately held companies and to manage and calculate risk in their loan portfolios. The company has been named to the Inc. 500 list of the fastest growing, privately held companies in the U.S. and to the Deloitte Technology Fast 500.