Credit Benchmark have released the December Credit Consensus Indicators (CCIs). The CCI is an index of forward-looking credit opinions for US, UK and EU Industrials based on the consensus views of over 20,000 credit analysts at 40 of the world’s leading financial institutions.
Drawn from more than 800,000 contributed credit observations, the CCI tracks the total number of upgrades and downgrades made each month by credit analysts to chart the long-term trend in analyst sentiment for industrials. A monthly CCI score of 50 indicates neutral credit quality, with an equal number of upgrades and downgrades made over the course of a month. Scores above 50 indicate that credit quality is improving. Scores below 50 indicate that credit quality is deteriorating.
Good news holds out in the latest CCI data, at least for the US and EU. Scores are still positive for these two regions, highlighting that consensus credit risk opinions point to greater improvement than deterioration. Economies for each are still strong, even with inflation pressures, supply chain issues, and the pandemic. Monetary policy will remain accommodative for a while, even if it’s tightened slightly.
Despite all of this, it’s hard not to be wary of the months ahead, given the new COVID variant. Supply chain pressures may ease a bit, but conditions won’t return to normal right away. Inflation is not yet in the double digits but is higher than many are used to, and energy costs may be a pain point for some time. The CCI scores for the US and EU remain positive but are progressively weakening and do not sit very far above the neutral line of 50, indicating the possibility that they may turn negative and stay there in the months ahead.
Much the same applies to the UK Industrial firms, which have a CCI score already shifted into negative territory.
UK Industrials: A Turn for the Worse
Consensus outlook on credit quality for UK Industrial firms has returned to negative territory after a five-month-long stretch of positive scores.
The UK CCI score is now 46.1, a significant drop from 55.9 last month.
UK manufacturing activity is still growing despite rising input prices and other intense supply chain pressures.
EU Industrials: Positive Trend Holds On
Consensus outlook on EU Industrial firms has clung onto a positive reading for the third month running, though the balance remains modest and is weaker than last month.
The EU CCI score is now 50.6, compared to 51.5 last month.
Eurozone manufacturing activity is growing and stabilizing but factories are battling supply chain challenges.
US Industrials: Stretch of Positive Credit Perseveres
Opinions for US Industrials are in positive territory for the tenth straight month but have shifted downward from earlier highs and sit at the weakest position since December 2020.
The US CCI score is 51.5, compared to 53.6 last month
US manufacturing activity is still growing but restrained amid a weak rise in new sales and shortages.
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