US Fitch Fundamentals Index: Majority of Credit Indicators Turn Negative in Fourth Quarter
OREANDA-NEWS. The U.S. Fitch Fundamentals Index remained at -2 for 4Q15, as the strain of sluggish global growth, collapsing commodity prices and signs of a slowdown in China helped push the index to the low end of neutral. The FFI turned negative in 3Q15 for the first time since 2009.
"The second half of the year was marked by broad-based indications of weakening credit conditions, weighing on the U.S.'s already modest economic growth," said James Batterman, Managing Director at Fitch. "While there are some relatively bright spots in mortgages and banks, the majority of FFI indicators point to a plateauing or decline in fundamental trends."
High yield corporate default rates continued to trend higher in the fourth quarter, weighing on the FFI. As of 31 December the default rate had risen to 5.3% on an issuer-weighted basis over the prior 12 months, driven by new defaults in the energy and mining sectors.
Restrained corporate capital spending outlooks, hampered by anemic global growth and low commodity prices, also contributed to the negative FFI score.
Healing in the US labor and housing markets led to stability in mortgage delinquencies and stable credit quality for banks, but these factors were not enough to swing the FFI positive.
Fitch Fundamentals Index
The Fitch Fundamentals Index (FFI) tracks changes in credit fundamentals across key sectors of the U.S. economy. Analyzing the relative strength or weakness of the index or its sub components can provide insight into how conducive conditions in the U.S. 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. The FFI's components include mortgage and credit card performance, corporate defaults, high-yield recoveries, rating actions and outlooks, EBITDA and CapEx forecasts, banks, the CDS outlook, and transportation trend. Released quarterly, the FFI relies primarily on proprietary Fitch-sourced data.
Fitch Ratings
Fitch Ratings is a leading provider of credit ratings, commentary and research. Dedicated to providing value beyond the rating through independent and prospective credit opinions, Fitch Ratings offers global perspectives shaped by strong local market knowledge and deep credit market experience. The additional context, perspective and insights we provide help investors to make important credit judgments with confidence.
Fitch Group is a global leader in financial information services with operations in more than 30 countries. In addition to Fitch Ratings, the group includes Fitch Solutions, an industry-leading provider of credit risk products and services, and Fitch Learning, a preeminent training and professional development firm. Fitch Group is jointly owned by Paris-based Fimalac, S.A. and New York-based Hearst Corporation.\
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