Credit conditions expected to weaken as labor market softens

Credit conditions will weaken over the next six months as the labor market cools and inflation remains elevated, according to the American Bankers Association’s latest Credit Conditions Index released Sept. 24..The headline credit index, based on a quarterly survey of chief economists from North America’s largest banks, came in at 34.4 for the third quarter of 2025, showing concerns over credit availability. While up 2.3 points from the prior quarter, it marked the third consecutive reading below the neutral threshold of 50 — signaling weakening credit conditions.The consumer credit index increased nearly 9 points to 37.5 as expectations improved for credit availability, despite most economists still predicting consumer credit quality to weaken in the next six months. The business credit index dropped 4.4 points to 31.3 amid a rise in concerns over firms’ access to credit, despite fewer economists expecting credit quality to weaken than in the previous quarter. Surveyed economists estimated a 27.5 percent chance of recession this year, and projected real GDP growth of 1 percent amid sluggish job gains. “While economic growth is expected to remain positive, a softening labor market and an inflation rate above the Fed’s target will weigh on credit conditions,” said ABA Chief Economist Sayee Srinivasan. “On the positive side, the recent rate cut and anticipated additional cuts over the next few quarters should mitigate some of these headwinds.”