Credit conditions in the U.S. have worsened for the first time in five months and are expected to weaken over the next six months, according to the American Bankers Association’s Credit Conditions Index.
The Headline Credit Index fell 15.7 points in Q1 2025 to 41.3, marking its first decline in five quarters. The downturn was broad-based, as expectations for both credit quality and credit availability weakened. The below-50 reading suggests that overall credit conditions are expected to weaken over the next six months, with expectations of weaker lending conditions amid heightened economic uncertainty.
The index is down considerably from the fourth quarter of 2024, when it rose above 50 for the first time in nearly three years last quarter.
“ABA’s latest Credit Conditions Index reflects a slowing but still healthy economy, with positive payroll growth, low unemployment, and rising real wages indicating continued strength in the labor market,” said ABA Chief Economist Sayee Srinivasan. “At the same time, trade policy uncertainty and the potential for higher prices may dampen near-term economic prospects. Pro-growth tax policy and continued regulatory reforms should counteract some of these factors as the year progresses.”
The Consumer Credit Index experienced an even sharper drop in the first quarter, plummeting 20.8 points to just 37.5, largely due to concerns over credit quality.
The Business Credit Index dropped 10.6 points to 45.0, as business credit conditions are slightly healthier than consumer credit conditions. Still, with the index slightly below 50, overall business credit conditions are expected to weaken modestly over this period.
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 bank economists expect business and household credit conditions to improve, while readings below 50 indicate an expected deterioration.