ABA Report: Credit Market Conditions Make Sharp Gains

Top economists from the largest U.S. banks anticipate substantial improvement in consumer and business credit market conditions in the next six months, according to American Bankers Association’s Credit Conditions Outlook released today.  The report highlights the results of the ABA Credit Conditions Index and summarizes a suite of indices derived from the quarterly outlook for credit markets produced by ABA’s Economic Advisory Committee. According to the Q2 2021 report, near-term expectations for credit quality and availability have improved for consumers and businesses, building on recovery that began last quarter.

All three components of the new index (headline, business and consumer credit) rose above 50 for the first time since mid-2018, suggesting that bank economists expect broad improvement in credit markets in the next six months, and that anxiety due to the COVID-19 pandemic and its effect on the economy is abating. (Index readings above 50 indicate that, on net, economists expect credit conditions to improve, while readings below 50 indicate a deterioration.) The headline credit index jumped more than 34 points to 77.9; the consumer credit index rose 37 points to 82.7; and the business credit index increased 31 points to 73.1.

“The latest round of federal stimulus, including another wave of economic impact payments, will provide more financial support to borrowers and lenders across the country,” said ABA Senior Economist Rob Strand. Strand noted that while continued improvement in credit conditions is expected, many consumers and businesses continue to struggle even as economic activity ramps up. “Banks are committed to working with customers still facing financial stress as the economy recovers,” he said.