Credit market conditions expected to weaken in coming months

Bank economists expect credit conditions to weaken in the next six months amid high inflation, according to the Credit Conditions Index released today by the American Bankers Association’s Economic Advisory Committee.

While the consumer and business credit markets remain on generally solid footing, the third-quarter report finds that near-term expectations for credit quality and availability fell sharply for the second consecutive quarter for consumers and businesses.

The Headline Credit Index fell again in Q3, dropping 20.1 points to 20.8, the weakest reading since the end of 2020. The Consumer Credit Index fell 15.7 points to 22.9 in Q3. More than half of EAC’s 13 members expect consumer credit availability to fall over the next two quarters, while only one expects it to strengthen. For consumer credit quality, two-thirds expect it to deteriorate in the next two quarters, while none expect improvement.

The Business Credit Index fell 24.4 points to 18.8. Most EAC members expect business credit availability to fall over the next two quarters, while only one expects it to strengthen. Meanwhile, all but two EAC members expect business credit quality to deteriorate over the next six months, and none anticipate an improvement. The sub-50 readings indicate that EAC members expect consumer credit conditions to weaken over the next six months.

Share.