Bank Economists: Credit Outlook Improves Amid Continued Softening

“The outlook for credit conditions, while muted, has improved as uncertainty regarding inflation and trade policy has eased,” said ABA Chief Economist Sayee Srinivasan. “At the same time, elevated inflation and slower job growth has weighed on consumer finances, which presents challenges for credit conditions in the near term.”

• The Headline Credit Index rose 3.1 points in Q4 2025 to 37.5, rising for a second consecutive quarter. However, the below-50 reading suggests that overall credit conditions are still expected to weaken over the next six months. The rise was primarily driven by improved expectations for credit availability.
• The Consumer Credit Index fell 2.5 points to 35.0. Most bank economists still expect consumer credit quality to deteriorate over the next six months, but the outlook for consumer credit availability remained stable. Overall, banks appear likely to maintain a prudent but stable consumer lending posture in the near term. 
• The Business Credit Index rose 8.7 points to 40.0. While respondents remain cautious regarding business credit quality, a lower share reported expectations for credit quality to weaken compared to the previous quarter. At the same time, respondents were more positive about firms maintaining access to credit. 

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.