Lower US GDP growth to dent corporates credit actions

Fitch Ratings has come out with its report on US GDP growth.

Fitch Ratings-New York-03 July 2012: A persistent low-growth environment combined with weak consumer demand and business investment will negatively affect most corporate and U.S. public finance sectors, according to a Fitch Ratings report. Affected sectors include industrials, financial institutions, municipals and infrastructure.

In its analysis, Fitch Ratings considers possible credit rating implications under three alternative scenarios for the U.S. economy over the next five years, consistent with its through-the-cycle approach to ratings. The three scenarios are: 1) a gradual improvement in U.S. GDP growth, 2) persistent low growth U.S. GDP, and 3) an oil price shock ($150/barrel prices).

While immediate events are currently suppressing growth below the base case forecast proposed, the low case reflects a continuation of these current negative trends. Debt service coverage metrics deteriorate due to weaker asset quality and low returns across many sectors. A gradual return to GDP growth would favourably impact unemployment and result in more ratings stability.

For additional discussion please see 'Alternative Scenarios for the U.S. Economic Recovery' published today.

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