Reading the economic signals: What credit professionals need to know now

If you’ve been working in credit long enough, you may have experienced multiple economic shifts—whether that be deep recession, rapid expansion or everything in between. As credit professionals, you may have noticed how the economy can drive or hinder business growth and performance.  

Why it matters: With business bankruptcies up 22% year-over-year, inflation climbing and long-term interest rates moving in the opposite direction of Fed cuts, credit professionals need a clear-eyed picture of where the economy stands and where it may be heading. 

What economists are saying 

Overall, economists are seeing signs of a slowing economy and expect that trend to continue in the coming year. The U.S. economy grew an annualized 1.6% in Q1 2026, up from 0.5% in Q4, per U.S. Bureau of Economic Analysis, but below a previously estimated 2%, a result of downward revisions to investment and consumer spending.  

“My best summary of the economy is that it is fragile,” said NACM Economist Amy Crews Cutts, Ph.D., CBE® during a Credit Congress session, An Economic Update: A Look at the Coming Year. “We’re on the knife edge in a lot of situations where if conditions are right, we can avoid recession at least for the overall economy but if conditions worsen, we may very well experience one. Some segments of the economy may already be in recession based on the industry type.” 

Consumers and businesses alike are being significantly impacted by a high inflation rate, which climbed to 4.2% for the 12 months ending in May, the highest level since April 2023 at 3.8%. The CPI was up 0.5% in May on top of a 0.6% gain in April, according to the U.S. Bureau of Labor Statistics report. “Energy prices rose 3.9% and accounted for over 60% of the monthly gain,” the report reads. “Meanwhile, the annual core (the CPI excluding food and energy) inflation rate went up to 2.9%, a new high since September 2025, compared to 2.8% in April. The energy index increased 23.5% for the 12 months ending May. The food index increased 3.1% over the last year.” 

A major contributor to heightened inflation is the global energy supply crisis resulting from the U.S.-Iran conflict. “I expect inflation to rise significantly in the near term primarily because the Strait of Hormuz remains closed,” said Cutts. “Since its closure, we’re running low on oil reserves globally, which have caused energy prices to skyrocket. Even if the Strait opens today, there would be at least a two-to-three-month period before normalization.” 

Raw metals and other commodity prices have risen sharply since April 2025, putting price pressure on final buyers. “From a commodity price standpoint…if the input prices are going way up, I don’t see how you’re going to lower prices for me as a consumer,” said Cutts. “The car manufacturers have absorbed the steel and aluminum tariffs but I don’t think the shareholders are going to pay indefinitely to hold those prices down—they can’t. Watch very carefully what the carmakers are saying about their ability to absorb those input costs, but I suspect they’re going to have to raise prices soon.” 

Business bankruptcies are higher than the pre-pandemic levels and rising fast, particularly for small businesses. Recent data from Epiq AACER revealed that 281 commercial Subchapter V elections within Chapter 11 in May 2026 represented a 26% increase over the 207 filings recorded in May 2025. “Worse though, is not the companies who filed the bankruptcy, because you have a chance to stand in line for your money, it’s the ones who close their doors and walk away without a trace,” said Cutts. 

The increased demand for AI data centers has weighed on consumers and businesses, with the most concentrated states being Virginia, Texas and California. According to the U.S. Energy Information Administration, residential electricity prices rose by 11.5% in 2025 and are expected to increase by up to 40% by 2030 compared to 2025. “With so many AI data centers being built, material suppliers are hitting physical limits, slowing construction of said data centers,” said Cutts. “As power demand exceeds or closely approaches the available supply, power grids become highly unstable. Consumers are also feeling the pinch from rate increases as the electric utilities pass on the costs of infrastructure and generation investment to meet the huge new demand for power. Consumers are starting to push back on data center development.” 

What credit managers are saying 

NACM’s seasonally adjusted combined Credit Managers’ Index (CMI) for May 2026 deteriorated 0.2 points to 55.0—a survey that reflects business conditions for the month just completed. “Despite  all of the major economic and global events happening, the CMI has been trending sideways over the past year,” said Cutts. “The six unfavorable factors fell this month, collectively offsetting the positive changes in three of the favorable factors.” 

Cutts continued, “The respondent comments in May noted stress from higher energy prices, rising shipping costs and the many factors negatively affecting agriculture. I believe the ongoing drought affecting much of the U.S. will be a larger issue for both our food supply and ethanol production as the year progresses. Additionally, farmers were hit with much higher fertilizer prices due to the closure of the Strait of Hormuz at prime planting time putting more financial stress on them at a low-cash-flow time of year.” 

Bottom line: Credit professionals are trained to be ahead of the curve. Right now, the curve is bending in a direction that warrants caution and preparation. Understanding the macroeconomic forces at play isn’t just useful context; it’s a risk management tool. 

See the full CMI report here and add your voice to the conversation by participating in the July survey. Open from July 7-15.