Credit conditions are expected to be slightly weaker over the next two quarters, with the outlook for business credit declining since Q2. .The latest American Bankers Association’s Credit Conditions Index showed a decline of 10.6 in Q3 in expectations for business credit, meaning the “outlook for business credit quality and for business credit availability both declined … indicating negative conditions for business lending.”The credit data derives from the broader economic outlook released last week by ABA’s Economic Advisory Committee. While that outlook cites steady growth, strong business investment and stability in the job market, the Q3 credit index registered the seventh-consecutive quarter in negative territory, below the “neutral threshold of 50 – signaling expectations for weak credit over the next six months.”The headline credit index dipped 4.1 percent to 44.7.The drop was driven mainly by the decline in the business index, which had been above the neutral point at 55 in Q2 but fell to 44.4 this quarter. The consumer index rose 2.5 percentage points, its second-consecutive quarterly increase, although the all-in figure for the index remained below 50 at 42.5 in the third quarter. Bankers are expressing “a cautious outlook for consumer lending,” ABA said.“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.”
