Fitch Fundamentals Index - U.S. Remains Negative on Continued Credit Weakness
OREANDA-NEWS. Continued credit weakness kept the U.S. Fitch Fundamentals Index in negative territory during the first quarter of 2016, marking the third consecutive negative quarter, according to Fitch Ratings in the new Fundamentals Index - U.S.
Deterioration among high-yield corporate indicators, balanced by improving mortgage delinquency trends, led to an index reading of -2, signaling a modest weakening pattern across multiple asset classes.
"After five years of flat or positive movement, the index is now pointing to worsening credit conditions in the U.S." says Bill Warlick, Senior Director, Macro Credit Research. "Further deterioration in some of these key indicators could signal a shift in the credit environment and dampen U.S. economic growth later in 2016."
Corporate indicators including Corporate Default Performance, Rating Actions and Outlooks, and High-Yield Recoveries were all strongly negative in the first quarter, primarily due to energy and mining sector bankruptcies. The balance of positive to negative ratings is at its worst since 2011 while high-yield recovery rates, at 21%, are at their lowest level in more than 10 years. Meanwhile, improvements in the Corporate EBITDA and Capex Forecast scores mostly reflect the lower base for earnings and capital spending in 2015.
U.S. 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, which ranges 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, banking sector health, the CDS outlook, and transportation trends. Released quarterly, the FFI relies primarily on proprietary Fitch-sourced data.