Bank Economists: Softer Credit Conditions Expected Over Next Six Months
By CU Today Staff —
WASHINGTON—Credit conditions are expected to weaken modestly over the next six months, with bank economists becoming more cautious about business lending even as their outlook for consumer credit improves, according to the American Bankers Association.
The ABA’s Headline Credit Index fell 4.1 points in the third quarter to 44.7, marking the seventh consecutive quarter below the neutral level of 50. Readings below 50 indicate economists expect credit conditions to deteriorate over the coming six months. The economists were surveyed Sept. 22.
The Consumer Credit Index increased 2.5 points to 42.5, its second consecutive quarterly improvement. Expectations for consumer credit quality improved slightly, while the outlook for credit availability reached the break-even level of 50.
Business lending showed greater weakness. The Business Credit Index dropped 10.6 points to 44.4 after jumping 13.3 points in the previous quarter. Expectations for both business credit quality and availability moved into contractionary territory.
“While bank economists anticipate some softness in credit conditions over the next six months, expectations have become somewhat more favorable over the course of the year” said ABA Chief Economist Sayee Srinivasan. “Despite elevated inflation and tightening monetary policy conditions, the economy is expected to remain in expansion.”
Originally reported by CU Today.