A new report from the American Bankers Association (ABA) reveals a growing optimism among bank economists about the outlook for credit conditions over the next six months.
The ABA’s Credit Conditions Index rose to its highest level in two years as the Headline Credit Index increased 7.6 points in the second quarter to 26.8, reflecting the gradual improvement in optimism among bank economists.
The Consumer Credit Index rose 11.7 points to 23.2 in Q2, improving for the second consecutive quarter, while the Business Credit Index improved 3.4 points in Q2 to 30.4, the highest level in two years.
While these numbers are still well below the neutral reading of 50, this uptick reflects a moderate increase in optimism among bank economists.
“The latest reading of ABA’s Credit Conditions Index reflects an uptick in optimism among bank economists as consumer spending and the labor market remain solid,” ABA Chief Economist Sayee Srinivasan said. “Banks remain committed to lend prudently to consumers and businesses over the next six months as recession risks decline.”
Further, the report notes that with job growth expected to continue, inflation forecasted to ease toward the Federal Reserve’s 2 percent target, and three rate cuts expected by the end of the year, the U.S. economy appears to remain well-positioned for a soft landing.
The 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.