Bank Economists: Credit Conditions Expected to Hold Stable Over Next Six Months

While credit conditions are expected to continue softening slightly over the next six months as the labor market encounters headwinds and the economy handles external shocks, they are expected to remain stable 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 (EAC). 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 June 2, 2026.

After falling into contractionary territory in 2025, the ABA Credit Conditions Index has shown signs of improvement, registering 48.8 in the second quarter of 2026, which is up 11.3 percentage points from the previous quarter. This marks the sixth consecutive quarter the index has come in below the neutral threshold of 50 - signaling expectations of deteriorating credit conditions over the next six months. EAC economists currently expect moderate real GDP growth through the end of 2027, sustained by higher nonresidential fixed investment. They estimate only a 25% probability of a recession in 2026 and expect PCE inflation to remain above 3% for the rest of the year.

"While bank economists anticipate some softness in credit conditions over the next six months, expectations have become somewhat more favorable," said ABA Chief Economist Sayee Srinivasan. "Despite elevated inflation and modest job growth, the economy is still projected to expand."

For the second quarter release:

• The Headline Credit Index increased 11.3 percentage points in Q2 2026 to 48.8, after no change in the previous quarter. Credit conditions are still expected to weaken over the next six months, with an improvement in business credit conditions offset by a weaker outlook for consumer credit.
• The Consumer Credit Index rose 9.2 points to 42.5 in the second quarter, an increase after two consecutive quarterly declines. Overall expectations for consumer credit quality remained negative, while the outlook for consumer credit availability had improved into expansionary territory in the second quarter. Bankers express a mixed and cautious outlook for consumer lending.
• The Business Credit Index rose 13.3 points to 55.0 in the second quarter, following a 1.7-point jump in the previous quarter. The outlook for business credit quality remained unchanged, however the conditions for business credit availability improved into expansionary territory over the quarter indicating a more positive outlook.
  
  

About the Credit Conditions Index
The ABA Credit Conditions Index is a suite of proprietary diffusion indices derived by the American Bankers Association from surveys of bank chief economists from major North American banking institutions. Since 2002, the bank economists have forecasted credit quality and availability for both businesses and consumers, indicating whether they expect conditions to improve, hold steady, or deteriorate over the ensuing six months. Readings above (below) 50 indicate that, on net, these expert business analysts expect credit market conditions to improve (deteriorate). Input from the bank economists is weighted equally in the indices. This data will remain anonymous, but historical index values are available upon request.

The CCI combines respondents' expectations for credit availability and quality over the next six months to form three diffusion indices - one headline index and two sub-indices (consumer and business). The indices are centered on 50, with higher (lower) values indicating that a net share of EAC members expect an improvement (deterioration) in credit quality or an expansion (contraction) of credit availability. The formula for the CCI is as follows:

= 50 + 50 ∗ (% ) - 50 ∗ (% )

The three indices are the Headline Credit Index, the Consumer Credit Index, and the Business Credit Index. The Consumer and Business Indices combine responses to the questions pertaining to consumer or business credit markets, while the Headline Index pools response data from all four survey questions.

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About the American Bankers Association

The American Bankers Association is the voice of the nation's $26.1 trillion banking industry, which is composed of small, regional and large banks that together employ over 2 million people, safeguard $20.5 trillion in deposits and extend $13.7 trillion in loans.