TSL Express Daily News

WASHINGTON — While the outlook for credit conditions over the next six months has improved, bank economists expect continued softening in credit quality and availability given the prospect of persistent labor market headwinds, according to the American Bankers Association’s latest Credit Conditions Index released today.

ABA’s Credit Conditions Index is 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 December 3, 2025. 

After entering expansionary territory at the end of 2024, the ABA Credit Conditions Index pulled back and registered 37.5 for this year’s fourth quarter. While the index came in below the neutral threshold of 50 — signaling expectations of deteriorating credit conditions over the next six months — this quarter’s reading marked an improvement of 3.1 points compared to last quarter. EAC economists currently estimate a 27.5% probability of a recession in 2026, with real GDP growth slowing significantly in late 2025 before returning to near-trend growth of 1.9% in 2026. 

“The outlook for credit conditions, while muted, has improved as uncertainty regarding inflation and trade policy has eased,” said ABA Chief Economist Sayee Srinivasan. “At the same time, elevated inflation and slower job growth has weighed on consumer finances, which presents challenges for credit conditions in the near term.” 

For the fourth quarter release: 

• The Headline Credit Index rose 3.1 points in Q4 2025 to 37.5, rising for a second consecutive quarter. However, the below-50 reading suggests that overall credit conditions are still expected to weaken over the next six months. The rise was primarily driven by improved expectations for credit availability.

• The Consumer Credit Index fell 2.5 points to 35.0. Most bank economists still expect consumer credit quality to deteriorate over the next six months, but the outlook for consumer credit availability remained stable. Overall, banks appear likely to maintain a prudent but stable consumer lending posture in the near term. 

• The Business Credit Index rose 8.7 points to 40.0. While respondents remain cautious regarding business credit quality, a lower share reported expectations for credit quality to weaken compared to the previous quarter. At the same time, respondents were more positive about firms maintaining access to credit.  

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: 

𝐼𝑛𝑑𝑒𝑥 = 50 + 50 ∗ (% 𝑖𝑚𝑝𝑟𝑜𝑣𝑒) – 50 ∗ (% 𝑑𝑒𝑡𝑒𝑟𝑖𝑜𝑟𝑎𝑡𝑒)

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.

About the American Bankers Association