OREANDA-NEWS. Fitch Ratings says recovery across key sectors in the Spanish economy is holding firm, with the Spanish Fitch Fundamentals Index (FFI) showing no negative sub-components in 2Q15 for the first time since the global financial crisis. The '+6' score, which signals positive fundamental trends, was unchanged from the previous quarter.

Spanish economic growth continues to strengthen as improving confidence and easing financial conditions, higher employment, and growing household consumption create a positive feedback loop.

New credit was a notable bright spot in the 2Q15 index. Acceleration in lending growth pushed the credit sub-component score to '+10' (strong positive). New credit for housing and consumption continued to grow at a double-digit rate year-on-year. Recovery in SME lending lags households, but Fitch believes that credit contraction is coming to a close.

We expect further improvement in lending growth due to a firmer economic outlook. Lending conditions are easing as banks are competing for customers following a deleveraging phase, but without compromising borrowers' credit quality. Lower cost of funds is also a driver of the easing lending conditions. But net bank lending is likely to be flat at best in 2015 because of amortisations and continued asset de-risking.

Trends in SME performance, ratings Outlooks, unemployment and transportation were also strongly positive. But the rates of improvement may not be maintained as some sectors start to normalise. The pace of decline in mortgage delinquencies slowed slightly, following five quarters of sharply declining trends.

The Fitch Fundamentals Index (FFI) tracks changes in credit fundamentals across key sectors of the Spanish economy. Analysing the relative strength or weakness of the index or its sub components can provide insight into how conducive conditions in Spain are towards economic growth.

The trend in potential drivers or constraints on economic growth or decline is indicated by the relative strength or weakness of the FFI, ranging from +10 to -10. Released quarterly, the FFI relies primarily on proprietary Fitch-sourced data. The FFI's components are mortgage, SME and ABS performance, EBITDA and capex forecasts, rating outlooks, the CDS outlook, new credit, unemployment forecast and transportation trend. As a result, the index provides a complete picture of the health of the Spanish credit markets.

The Spanish FFI is an extension of the US Fitch Fundamentals Index, launched in October 2013 and published quarterly.