While credit conditions have improved, bank economists expect continued softening in credit quality and availability heading into 2026, according to the American Bankers Association’s Credit Conditions Index.
ABA’s Credit Conditions Index, which polls chief economists from North America’s largest banks, registered a score of 37.5 for the fourth quarter. For context, readings above 50 indicate that bank economists expect business and household credit conditions to improve, while readings below 50 indicate an expected deterioration.
While the index came in below the neutral threshold of 50, the 37.5 score was an improvement of 3.1 points compared to last quarter.
“The outlook for credit conditions, while muted, has improved as uncertainty regarding inflation and trade policy has eased,” ABA Chief Economist Sayee Srinivasan said. “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.”
The index consists of two main components – the Consumer Credit Index and the Business Credit Index.
The Consumer Credit Index fell 2.5 points to 35.0. Most bank economists expect consumer credit quality to deteriorate over the next six months. However, the outlook for consumer credit availability remained stable.
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 third quarter. However, respondents were more positive about firms maintaining access to credit.
Overall, the economists estimate a 27.5 percent probability of a recession in 2026, with real GDP growth slowing significantly in late 2025 before returning to growth of 1.9 percent in 2026.