Credit Benchmark have released the July 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.
The latest data on US Industrials provides further evidence that the sector may be on the mend. For the fifth consecutive month, the US CCI score is above 50, and each month has seen a higher score than the last. The score is now in the best position since January 2017. It’s quite a contrast from the lows seen during Q1 and Q2 of 2020. The news is strong on multiple fronts, with air travel continuing to pick up, factory activity in good shape even with some hiccups, and the economy in an solid position. An additional boost may come from infrastructure spending.
Meanwhile, scores for the UK and EU have been dipping in and out of positive and negative territory, with consensus credit opinions having yet to settle on a stable outlook. The months ahead will hopefully provide greater clarity.
Beyond the Delta variant, supply chain concerns may limit economic progress in the months ahead for these and other regions. CCI data were highlighted in the recent white paper, Trade Credit Risk and Supply Chains: The Post-Pandemic Landscape.
UK Industrials: A Step Back, a Step Forwards
UK Industrial firms have slipped back into positive territory after backflipping into negative territory last month.
The UK CCI score is 51.5, a positive change from 43.9 last month.
The UK economy is in a good position and reports of a spike in new orders and a doubling of manufacturing growth indicates better days ahead for the industry.
EU Industrials: Struggling to Improve
EU Industrial companies are back in a weak position, hovering below neutral after last month’s positive CCI reading.
The EU CCI score is 48.3, a negative change from 53.5 last month.
Europe’s economy is in great shape but pressures on some industries such as the building material shortages facing construction may act as an anchor to growth.
US Industrials: All Signs Point Up
The outlook for US Industrial companies continues to shine brightly.
The US CCI score is 55.9 this month, another instance of improving credit quality from last month’s CCI of 52.7.
The US economy is in good shape and one measure showed manufacturing activity expanded at the fastest pace in 14 years of recording. With these positive signs, the CCI should continue to improve.
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