Credit conditions outlook improves despite quality, availability concerns

The U.S. credit conditions outlook improved in the fourth quarter, but bank economists expect credit quality and availability to soften over the next six months, according to the American Bankers Association’s latest Credit Conditions Index..The index, a suite of indices taken from the quarterly outlook for credit markets from the ABA’s Economic Advisory Committee, registered 37.5 for the fourth quarter of 2025, up 3.1 points from the previous quarter. However, that was still well below the mark of 50, which signals improving conditions. The survey of chief economists from North America’s largest banks was taken Dec. 3.“The outlook for credit conditions, while muted, has improved as uncertainty regarding inflation and trade policy has eased,” said ABA Chief Economist Sayee Srinivasan. “At the same time, elevated inflation and slower job growth have weighed on consumer finances.”The consumer credit index fell 2.5 points to 35.0, indicating concern about household credit quality, although expectations for consumer credit availability remained steady. Banks are expected to maintain a cautious but stable lending posture to consumers, according to the ABA.The business credit index climbed 8.7 points to 40.0. While still signaling deterioration, fewer economists expect business credit quality to weaken, and more respondents indicated firms should be able to maintain access to credit in the coming months.Economists on ABA’s Economic Advisory Committee project a 27.5% probability of a recession next year. They project real GDP growth to slow late this year before improving to a near-trend pace of 1.9% in 2026.