grow, their spending remains cau-
tious. The average age of the automo-
bile on the road today is 11.4 years.
Millennials are eschewing home pur-
chases, preferring instead to gather in
high-rise apartments in city centers,
resulting in lower vacancy rates and
more pressure on rent prices.
It’s not only Millennials who are
choosing to rent. Some 10 percent
of tenants are people in default who
can’t buy homes. “Rising rents will
likely continue and keep pressure
on the core consumer price index,”
Dismuke said. “My risk of running
at a .7 CPI is low compared to a few
years ago.”
Long-term interest rates won’t rise
much and inflation won’t get out of
hand. The growth outlook is much
weaker due to an aging population
and limited gains in productivity.
Since 1950, average GDP has been
3.6 percent. The Congressional
Budget Office, a bipartisan budget-
ary group, forecasts 2.1 percent GDP
over the next 10 years.
Historians know that there have
been only two times when productiv-
ity growth exceeded 2 percent: the
Industrial Revolution and the Tech
Revolution. For gains in the GDP,
the United States will have to rely on
growth in productivity for economic
growth, because population growth
over the next 40 years is expected to
be at 0.4 percent.
Other headwinds that the econ-
omy will battle include the massive
government debt that must be ser-
viced. That debt and interest expense
will crowd out productive invest-
ments. Also troubling are the deci-
sions coming out of the Euro zone
and the overall global weakness.
“Evidence is finally going to over-
whelm the Fed” and they will finally
raise rates. Dismuke predicts that
the rate on Fed Funds will increase
in March; other economists point to
July 2015 as the likely date.
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Total Lending, Net
Income Up at Wisconsin
Banks
The FDIC’s third-quarter report
brought good economic news for Wis-
consin banks. The 252
banks headquartered
in the state had a total
income of $255.7 mil-
lion during the quarter,
compared to $238.7
million during the same
quarter of 2013.
• Profits rose about 7 percent dur-
ing the third quarter
• Total loans and leases posted a
5.3 percent increase to $70.8 billion
during the third quarter. This com-
pares with a total of $67.3 billion in
2013.
• The great majority of state banks
(94.5 percent) were profitable.
• Commercial lending increased
14 percent over the past year.
Wisconsin’s 190 state-chartered
banks reported growth in total lending
and net income over a year ago: Total
lending increased 6.2 percent while
net income rose 2.4 percent.
Peter Bildsten, secretary of the
Department of Financial Institutions,
said: “It’s especially encouraging to see
healthy year-over-year loan growth,
with capital at near-record levels
and loan portfolios continuing to
improve.”
Michael Mach, administrator of
DFI’s Division of Banking noted that
“past due loan ratios continue to
decline in all major loan categories—
real estate, consumer, and commer-
cial. As a result, state-chartered banks
significantly reduced their net charge-
offs to less than half of what they were
a year ago—from 0.51% to 0.24%.This
has had a big impact on banks’ bottom
lines.”
10
Wisconsin Community Banker
November/December 2014
Peter Bildsten
