According to a survey of 15 chief bank economists, credit conditions are expected to tighten over the next six months to their worst levels since the pandemic amid a slowdown in economic growth and higher interest rates, according to the American Bankers Association’s latest Credit Conditions Index. 

In the second quarter of 2023, the Headline Credit Index fell to 5.8 from 12.5 in the first quarter; its lowest point since the start of the pandemic as banks are likely to grow more cautious about extending credit. 

Meanwhile, the Consumer Credit Index fell 7.9 points to 5.8. Economists expect credit availability to deteriorate more than credit quality, though almost all expect both to decline. 

The Business Credit Index fell 5.6 points to 5.8. All economists expect business credit availability will deteriorate in the next six months, and most expect business credit quality to deteriorate. 

Readings above 50 indicate economists expect business and household credit conditions to improve, while readings below 50 indicate an expected deterioration over the next six months. 

“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.” 

The survey was conducted after “recent stress in the banking sector,” the ABA added. 

The ABA’s Economic Advisory Committee, from which the survey was conducted, is comprised of economists from banks, including JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley.