OREANDA-NEWS. The Spanish Fitch Fundamentals Index (FFI) has dipped slightly to '+5' in 3Q15, as some indicators normalise with the approach of the cyclical peak. Credit conditions are still improving, albeit at a slightly slower rate, and are therefore supportive of growth.

Economic recovery in Spain has kept the FFI positive since 4Q13. Falling delinquencies, an improving labour market and a return to lending growth lifted the index to a strong '+6' at end-2014. However, flat corporate forecasts and a gentler pace of improvement in Fitch's rating Outlooks in 3Q15 pushed the FFI down, but only slightly.

A shift in risk sentiment in global markets also weighed on the index, pushing the CDS outlook score into negative territory. But the index remains positive or neutral in all other components.

The flow of new lending to SMEs has been a bright spot in 3Q15. New credit growth of smaller value loans of up to EUR1m is pronounced. Monthly data shows largely uninterrupted growth for new, small loans over the last six months, suggesting more sustainable credit demand among Spain's micro companies, consistent with a broad recovery.

The 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 whether conditions in Spain are conducive to 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 report, 'Fitch Fundamentals Index - Spain' is available at www.fitchratings.com.