Credit conditions are expected to soften over the next six months as businesses and consumers wait for greater clarity on the economic outlook especially trade policy, according to the American Bankers Association’s latest Credit Conditions Index released today.
The latest summary of 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. The bank economists were surveyed on June 4, 2025.
After entering expansionary territory at the end of 2024, the ABA Credit Conditions Index declined for a second consecutive quarter in Q2, below the neutral threshold of 50 — signaling expectations of deteriorating credit conditions over the next six months. While EAC economists currently estimate a 35% probability of a recession in 2025, their forecast is more consistent with a “growth pause” scenario characterized by GDP growth below 1% and monthly job gains under 50,000.
“While recent trade negotiations and the prospect of Congressional agreement on tax policy have provided some degree of reassurance to lenders, tariff-related uncertainty remains a headwind to credit conditions and broader economic growth according to the survey,” said ABA Chief Economist Sayee Srinivasan. “‘Hard data’ suggest the economy remains on solid footing, but consumer and business sentiment indicate that policy uncertainty remains elevated and is causing some firms and households to adopt a cautious approach to hiring, spending and investment.”
For the second quarter release:
- The Headline Credit Index fell 9.1 points in Q2 2025 to 32.1, marking its second consecutive quarter-over-quarter decline after expanding throughout 2024. The downturn was primarily driven by deteriorating expectations for consumer and business credit quality. The below-50 reading suggests that overall credit conditions are expected to weaken over the next six months.
- The Consumer Credit Index fell 8.9 points to 28.6. Most surveyed bank economists expect consumer credit quality to deteriorate over the next six months, though most also expect consumer credit availability to remain unchanged. Overall, banks appear likely to maintain a prudent but stable lending posture in the near term.
- The Business Credit Index fell 9.3 points to 35.7 due to falling expectations for business credit quality. While just over half of respondents expect credit quality to weaken, respondents were more upbeat about firms maintaining access to credit, with all respondents indicating they expect business credit availability to hold steady over the next six months.
Read the full report with detailed charts and a discussion of the broader economic context.
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.
Answers to Frequently Asked Questions about the ABA Credit Conditions Index can be found in an Appendix attached to the outlook. This report and all previous reports can be found at https://www.aba.com/news-research/research-analysis/aba-credit-conditions-index.