Credit Benchmark have released the February 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.
February marked another month of positive readings across the board, with UK firms returning to credit health after earlier instances of negative or weak positive readings. The US retains long-term strength with 12 months of positive CCI readings, while EU firms enjoy a more modest stretch of positivity.
UK Industrials: One Step Forward
UK Industrial firms are gaining positive momentum after a second consecutive month in the green.
The UK CCI score is now 52.4, a notable improvement from last month’s score of 50.2 which barely crossed the neutral threshold after an earlier instance of net deterioration.
Factory production increased this month amid rising domestic demand, while COVID-related delivery delays seem to be finally abating – however the Russia / Ukraine conflict may yet undermine this progress.
EU Industrials: Ticking Along
Another month of mild positivity for EU Industrial firms, with a fifth consecutive instance of a CCI above the 50 score, but with very little variation in either direction.
The EU CCI score has shown slight improvement at 51.5, after last month’s score of 51.1. The CCI has not risen above 51.5 in the past five months of improvements.
With chip shortages impacting manufacturers globally, European firms have cause for optimism after a €43bn investment plan was unveiled by the European Commission this month to promote investment into semiconductor chip production in the region.
US Industrials: Long Term Positivity, Short Term Weakening
US Industrial firms enjoyed yet another month of positive credit quality, with a full year of CCI scores above the neutral line. The last time the group dipped into the red was in December 2020.
The US CCI score is 50.9, which shows a drop from last month’s score of 53.4. Whether this temporary weakening indicates a longer term downwards trend and potential drop into negative territory is to be determined.
There are some indications that pandemic-related delays and supply chain disruptions have spurred a manufacturing revival within the US where government tariffs were previously unsuccessful.
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