Bank Economists: Credit Conditions Will Hold Relatively Steady Over Next Six Months

While credit conditions are expected to continue softening over the next six months as the labor market faces challenges, they will hold relatively steady according to the American Bankers Association’s latest Credit Conditions Index released today.
 
ABA’s Credit Conditions Index examines a suite of indices derived from the quarterly outlook for credit markets produced by ABA’s Economic Advisory Committee (EAC). The EAC includes chief economists from North America’s largest banks. Readings above 50 indicate that, on net, bank economists expect business and household credit conditions to improve, while readings below 50 indicate an expected deterioration. The bank economists were surveyed on March 4, 2026. 
 
After entering expansionary territory at the end of 2024, the ABA Credit Conditions Index has remained soft and registered 37.5 in the first quarter of 2026. This is the fifth consecutive quarter the index has come in below the neutral threshold of 50 — signaling expectations of deteriorating credit conditions over the next six months — with the index remaining unchanged from the previous quarter. EAC economists currently expect real GDP growth to slow and return to on-trend growth through the end of 2027 and estimate a 25% probability of a recession in 2026. 
 
“Bankers broadly expect continued weakness in credit conditions over the next six months, but the outlook remains steady and we have not seen further deterioration,” said ABA Chief Economist Sayee Srinivasan. “Persistent inflation and subdued labor growth remain headwinds, but economic growth is expected to remain positive.”

For the first quarter release:

• The Headline Credit Index remained unchanged in Q1 2026 at 37.5, after improving 1.1 points in the previous quarter. Credit conditions are still expected to weaken over the next six months, with an improvement in business credit conditions offset by a reduced outlook for consumer credit.
• The Consumer Credit Index fell 1.7 points to 33.3 in the first quarter, marking the second consecutive quarterly decline. Overall expectations for both consumer credit quality and credit availability were negative in the first quarter. Bankers express a mixed and cautious outlook for consumer lending.
• The Business Credit Index rose 1.7 points to 41.7 in the first quarter, following an 8.7 point jump in the previous quarter. While the below-50 reading still signals expected deterioration, the outlook for both business credit quality and availability became less negative over the quarter.

About the Credit Conditions Index
 
The ABA Credit Conditions Index is a suite of proprietary diffusion indices derived by the American Bankers Association from surveys of bank chief economists from major North American banking institutions. Since 2002, the bank economists have forecasted credit quality and availability for both businesses and consumers, indicating whether they expect conditions to improve, hold steady, or deteriorate over the ensuing six months. Readings above (below) 50 indicate that, on net, these expert business analysts expect credit market conditions to improve (deteriorate). Input from the bank economists is weighted equally in the indices. This data will remain anonymous, but historical index values are available upon request.
 
The CCI combines respondents’ expectations for credit availability and quality over the next six months to form three diffusion indices — one headline index and two sub-indices (consumer and business). The indices are centered on 50, with higher (lower) values indicating that a net share of EAC members expect an improvement (deterioration) in credit quality or an expansion (contraction) of credit availability. The formula for the CCI is as follows: 

𝐼𝑛𝑑𝑒𝑥 = 50 + 50 ∗ (% 𝑖𝑚𝑝𝑟𝑜𝑣𝑒) – 50 ∗ (% 𝑑𝑒𝑡𝑒𝑟𝑖𝑜𝑟𝑎𝑡𝑒)

The three indices are the Headline Credit Index, the Consumer Credit Index, and the Business Credit Index. The Consumer and Business Indices combine responses to the questions pertaining to consumer or business credit markets, while the Headline Index pools response data from all four survey questions.