ABA: Credit market will worsen in next six months

Credit conditions will weaken over the next six months amid slowing economic growth and higher interest rates, according to the American Bankers Association's Credit Conditions Index. .The headline credit index fell 6.7 points to 5.8 in the second quarter, its lowest mark since the start of the pandemic, indicating that banks will grow more cautious about extending credit in the next two quarters. The index for consumer credit fell 7.9 points to 5.8, signaling expectations that credit availability will deteriorate more than credit quality. The index for business credit fell 5.6 points to 5.8. .The index, taken after the recent failures of Silicon Valley Bank and Signature Bank, is drawn from indices derived from the quarterly outlook for credit markets produced by the ABA's Economic Advisory Committee of chief economists from North America's largest banks. Readings above 50 indicate that bank economists expect business and household credit conditions to improve. .The EAC has projected no economic growth for this year as the Federal Reserve continues to raise interest rates to battle inflation before a 1.6 percent expansion in 2024 as the Fed begins to reduce rates. ."ABA's latest Credit Conditions Index recognizes that recent strong credit quality will be challenged by heightened uncertainty and broader economic headwinds this year," said ABA Chief Economist Sayee Srinivasan. "Lenders are responding with cautious and prudent underwriting."