Stable and Positive Outlooks Predominate Global Industry Sectors

The global economy is gaining traction as stable and positive outlooks dominate Moody’s Investors Service’s distribution of industry sector outlooks and stable growth appears more likely. Moody’s 54 industry sector outlooks reflect the rating agency’s expectations for fundamental business conditions over the coming 12 to 18 months. Currently, 12 of those outlooks are positive, four are negative and the rest are stable.

"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 nonfinancial companies may be near a difficult-to-improve-upon peak."

Consumer-based industries, including consumer durables, global consumer products, North American building materials and U.S. homebuilding, have bolstered growth since the Great Recession and particularly over the past three to five years, Moody’s reported. Still, flagging monetary stimulus puts strengths in this sector at risk.

In March, global integrated oil moved to a positive outlook from stable, while global oilfield services and drilling and North America and EMEA refining and marketing moved out of negative territory to stable. During the second quarter, the Latin American telecommunications’ outlook improved to stable from negative, as did the global shipping sector.

Risks increased in the global automotive sector, as the outlook switched to negative from stable in October 2016, while in the same month the European automotive parts suppliers sectors fell to stable from positive, Moody’s said.

In a separate report, Moody’s noted that, so far this year, only 14 global nonfinancial companies have fallen into speculative investment-grade territory; in 2016, 63 companies lost their investment-grade status, prompted in part by flagging commodity-linked industries and negative sovereign rating actions.

– Nicholas Stern, senior editor

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