Top Bank Economists See Credit Conditions Rebound

The nation’s top bank economists observed that the outlook for credit quality and availability rebounded for both consumers and businesses after bottoming out last summer, according to the American Bankers Association’s new Credit Conditions Outlook released today. The outlook highlights results from the ABA Credit Conditions Index, a suite of indexes derived from the quarterly outlook for credit markets produced by ABA’s Economic Advisory Committee.

While the headline credit index rose to 43.8, marking the second consecutive quarterly improvement after a series low the previous summer, economists still expect continued weakness in the credit markets over the next six months. (Index readings above 50 indicate that, on net, economists expect credit conditions to improve, while readings below 50 indicate a deterioration.)

Meanwhile, both the consumer and business credit indexes showed improvement, but remained below 50, with further deterioration expected over the next six months. The consumer credit index rose to 45.3, the highest reading since mid-2019, and the business credit index rose to 42.2, notching the strongest reading in more than two years due in large part to improved expectations for credit quality and availability.

“Although credit quality is still expected to worsen over the first half of the year for both consumers and businesses, the overall outlook for credit markets has improved significantly since the summer and fall,” said ABA Senior Economist Rob Strand. “As widespread inoculations against the virus and new fiscal stimulus measures help heal the economy, banks will continue to work closely with policymakers, consumers and businesses to ensure that affordable credit remains available and recovery strengthens.”