The latest American Bankers Association (ABA) Credit Conditions Index maintains bank economists expect credit conditions to soften the remainder of the year through economic headwinds faced by consumers and businesses.
“ABA’s latest Credit Conditions Index anticipates that lenders are preparing for weakening economic growth and increasing financial challenges for consumers and businesses as the year progresses,” ABA Chief Economist Sayee Srinivasan said. “At the same time, bank economists expect inflation to continue to ease, reducing the need for additional Fed rate hikes, and that underlying strength in the labor market will provide a buffer for consumers and businesses.”
The analysis stems from the quarterly credit markets outlook produced by the ABA’s Economic Advisory Committee (EAC), which includes chief economists from North America’s largest banks.
According to the ABA, banks are expected to exercise caution when extending credit to both businesses and consumers over the remainder of the year.
The analysis showed most EAC economists believe credit quality and availability will weaken over the next six months. While credit quality and availability have been resilient since the onset of the pandemic, recent index readings foretell softening credit conditions for both consumers and businesses.
Bank economists have forecasted credit quality and availability for both businesses and consumers since 2002, the ABA noted, with results determining whether they expect conditions to improve, remain steady or deteriorate over the ensuing six months.