Recovery Update: December 2011
As the U.S. economy struggles to recover from the recent recession and Americans remain wary of spending on anything but the most essential items, revenues for Standard & Poor's Ratings Services' speculative-grade rated industrial companies (those with credit ratings of 'BB+' or lower) have only recently recovered to levels last seen in early 2008, and many sectors that depend heavily on consumer discretionary spending have yet to rebound fully. According to our commentary " U.S. Speculative-Grade Borrowers Face A Rough Road To Revenue Growth In A Still Sputtering Economy," given that speculative-grade borrowers generally suffered bigger percentage revenue declines than their investment-grade competitors (those rated 'BBB-' or higher) during the downturn--and have recovered more slowly since--headwinds for them remain strong. The picture in Europe is similarly sobering – we have recently revised our economic outlook to reflect the fact that a recession is approaching. In Standard & Poor's view, the approaching recession first took hold in Spain, Portugal, and Greece, and the economic woes are now spilling over into the eurozone's core of France and Germany. The composite PMI for France and Germany dipped below the 50-point mark in October--a signal of recession--continuing the downtrend it started in September. Also, in October Italy's composite PMI recorded its sharpest monthly decline since 2009.
According to " European Economic Outlook: Back In Recession," in revising our forecasts for 2012 and taking a first look at 2013, we have once again cut our 2012 real GDP growth forecasts for France to 0.5% from 0.8%, Germany to 0.6% from 1%, and Italy to 0.1% from 0.2%. We now expect a mild recession in first-half 2012 in the eurozone, ahead of a modest pick up in the second part of the year. We anticipate eurozone real GDP growth to average 0.4% next year. |
