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US, China Challenges Persist for Global Credit Outlook

The 2024 global outlook for credit has improved since Fitch’s previous outlook review published at the end of 2023, says Fitch Ratings. Positive US macroeconomic data in 1Q24, buoyed by resilient consumer demand and fiscal stimulus, stronger demand in some large emerging markets, and signs of a more sustainable recovery in Europe all contributed to a generally more sanguine outlook for credit relative to the beginning of the year.

We reviewed 273 sector, regional and asset performance outlooks, covering the entirety of our ratings portfolio for our mid-year credit outlook update. These outlooks are forward-looking assessments of the underlying operational and business conditions for a sector compared to the previous calendar year. For mid-year 2024, we changed 14 sector outlooks from our initial assessment in December 2023. Of these, 12 were in a positive direction either from ‘deteriorating’ to ‘neutral’ or ‘neutral to ‘improving’.

Notable positive changes include EMEA Real Estate, the North American Sovereigns regional outlook, and EMEA ABS asset performance outlook.

Despite the positive macro trends for credit in 1H24, the overall picture remains broadly stable with the overwhelming proportion of outlooks, weighted by dollar-value of Fitch-rated issuance, being ‘neutral’. That said, a significant number of outlooks (68 out of 274 assessed) remain ‘deteriorating’. The bulk of these are for structured finance where we continue to expect asset performance deterioration. Still-high interest rates and structural challenges for commercial real estate remain pertinent for CMBS in the US and Europe while rate sensitivity is a factor for ABS in most regions.

We continue to expect a material growth slowdown in the US in 2H24 while persistent challenges face China’s housing sector. Both factors remain key risks for global credit.
Source: Fitch Ratings

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