ABA Report: Business, Consumer Credit Markets to Continue Improving Over Next Six Months

Top economists from the largest U.S. banks expect credit conditions to continue improving for both consumers and businesses over the next six months, according to ABA’s Credit Conditions Outlook released today.

The report highlights the results of the ABA Credit Conditions Index and summarizes a suite of indexes derived from the quarterly outlook for credit markets produced by ABA’s Economic Advisory Committee. According to the fourth quarter 2021 report, after strong readings over the last two quarters, near-term expectations for credit quality and availability eased somewhat for consumers and businesses but remain in positive territory.

All three components of the index (headline, business and consumer credit) held well above 50. This suggests that bank economists anticipate that credit market recovery will continue over the next six months, though the pace of expansion may slow as the economy continues to normalize after rebounding from last year’s pandemic-induced recession. (Index readings above 50 indicate that, on net, economists expect credit conditions to improve, while readings below 50 indicate deterioration.) The headline credit index fell 10.4 points to 66.3; the consumer credit index declined 9.5 points to 67.3; and the business credit index declined 11.4 points to 65.4.

“The outlook for credit markets remains positive, as all three indices remain in expansionary territory,” said ABA Chief Economist Sayee Srinivasan. “However, bank economists have identified ongoing supply chain constraints, potential virus mutations and/or rising cases as reasons for downgrading their economic outlook over the coming months. It remains to be seen whether there will be another surge of COVID-19 infections this winter.”