Wednesday 22 November 2017
 
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ANALYSIS

Business conditions currently indicate continuing
global economic growth, says Moody’s.

Global industry sector outlooks positive: Moody’s

TORONTO, July 20, 2017

The industry sector outlook is again positively biased as the global economy continues to gradually pick up speed, with steady growth looking increasingly sustainable., Moody's Investors Service said in a new report.

Nevertheless, the reduction of monetary stimulus that helped contain the 2008-09 recession threatens this growth if it is not well executed or received.

Moody's 54 industry sector outlooks -- 12 of which are positive, four are negative and the remainder are stable -- reflect the rating agency's expectations for fundamental business conditions in a given sector over the next 12 to 18 months.

"Business conditions currently indicate continuing, if hesitant, global economic growth," said Moody's senior vice president Bill Wolfe.

"Even so, despite an uneven recovery and even with many commodities-based sectors only recently emerging from a prolonged supply-side adjustment, overall business conditions are strong enough to support reduced monetary stimulus-suggesting that conditions for non-financial companies may be near a difficult-to-improve-upon peak."

Since the financial crisis, consumer-based industries have been a source of strength, Wolfe says in "Non-Financial Corporations - Global Industry Sector Outlooks: Favourable ISO distribution faces reduction in monetary stimulus."

Four of the 12 positive outlooks -- US Consumer Durables, Global Consumer Products, North American Building Materials and US Homebuilding -- are consumer-centric, and have provided positive signals for most of the past three to five years, and retreating monetary stimulus puts strength in consumer-based sectors at risk.

Recent changes in the rating agency's ISO inventory have, for the most part, been directionally positive, Moody's says. In March, three energy-related ISOs were upwardly revised: Global Integrated Oil moved to positive from stable, while Global Oilfield Services and Drilling and North America and EMEA Refining and Marketing both moved to stable from negative.

And in the second quarter, five ISOs were changed for the better, including Latin American Telecommunications, which moved to stable from negative and Global Shipping, which was revised to stable from negative.

Despite the directionally positive changes, Moody's ISOs also show some cautionary signals. After seven years of being either stable or positive, the agency changed the outlook for the Global Automotive Manufacturing industry in October 2016 to negative from stable, and in the same month, the outlook for European Automotive Parts Suppliers was revised to stable from positive. And given that auto manufacturing is not only an employment-intensive industry, but one that consumes vast quantities of inputs from other industrial sectors, these shifts indicate the possibility of contagion to other sectors.

Moody's new report provides a full list of its industry sector outlooks, as well as EBITDA forecasts for the next 12 months by sector. – TradeArabia News Service




Tags: Moody’s | ISO | Global economy |

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