Credit conditions are expected to weaken slightly over the next six months as inflation remains elevated and financial conditions remain restrictive, according to the American Bankers Association’s latest Credit Conditions Index released today.
ABA’s Credit Conditions Index examines a suite of indices derived from the quarterly outlook for credit markets produced by ABA’s Economic Advisory Committee. The EAC includes chief economists from North America’s largest banks. Readings above 50 indicate that, on net, bank economists expect business and household credit conditions to improve, while readings below 50 indicate an expected deterioration. The bank economists were surveyed on Sept. 22.
The ABA Credit Conditions Index has shown signs of modest improvement this year but still indicates expected deterioration. The Headline Credit Index registered 44.7 in the third quarter of 2026. This is the seventh consecutive quarter the index has come in below the neutral threshold of 50 — signaling expectations for weak credit conditions over the next six months.
In Q3 2026, the index edged down 4.1 percentage points, from 48.8 in the previous quarter, with improving consumer credit conditions offset by a weaker outlook for business credit. EAC economists currently expect moderate and consistent real GDP growth through the end of 2027, sustained by higher nonresidential fixed investment and stable consumption. They estimate a 25% probability of a recession in 2027 while the unemployment rate and wage growth are expected to remain steady through the end of the year.
“While bank economists anticipate some softness in credit conditions over the next six months, expectations have become somewhat more favorable over the course of the year” said ABA Chief Economist Sayee Srinivasan. “Despite elevated inflation and tightening monetary policy conditions, the economy is expected to remain in expansion.”
For the third quarter release:
- The Headline Credit Index decreased 4.1 percentage points in Q3 2026 to 44.7, after an 11.3-point increase in the previous quarter. Credit conditions are still expected to weaken over the next six months, with an improvement in consumer credit conditions offset by a weaker outlook for business credit.
- The Consumer Credit Index rose 2.5 points to 42.5 in the third quarter, the second consecutive increase following two quarters of declines. While expectations for consumer credit quality improved slightly, the index remained negative, while the outlook for consumer credit availability came in mixed, registering at the break-even level of 50 in Q3. Bankers expressed a cautious outlook for consumer lending.
- The Business Credit Index fell 10.6 points to 44.4 in the third quarter, following a 13.3-point jump in the previous quarter. The outlook for business credit quality and for business credit availability both declined into contractionary territory over the quarter, indicating negative conditions for business lending.
