Rising negative outlooks reflect weaker credit environment for US: Fitch

ISTANBUL

Rising negative outlooks reflect a weaker credit environment for the US in the second half of this year, Fitch Ratings said Wednesday in a report.

The majority of ratings across sectors in the US have stable rating outlooks, but the gap between positive and negative outlooks has narrowed with the increase in the latter over the last four quarters, given the high cost and interest rate pressures on borrowers, it said.

The percentage of ratings with positive outlooks, 7.2%, currently exceeds those with negative outlooks with 5.1%, the agency noted.

"Consumer spending growth has been holding up well and will likely be tempered as nominal wage and job growth slows," said the report. "Housing demand is still solid but has recently softened with persistent high home prices, although affordability may improve with declining rates."

While delinquencies and defaults are expected to continue rising in the second half of the year for rate sensitive borrowers, Fitch projects higher commercial mortgage-backed securities delinquencies for all major commercial real estate sectors in the second half due to increased maturity defaults from high rates.

The rating agency said it expects two interest rate cuts from the Federal Reserve this year, in September and December.

"A soft landing is likely with moderating inflation and low unemployment, and we are projecting annual economic growth of 2.1%, down from 2.5% in 2023," it added.