Country Risk Climates: Coface Upgrades Risk Sectors

Positive changes in North America and Asia
Risks stabilise in Europe as the textile industry invests in innovation
Risks have been upgraded to ‘moderate’ in the retail and automobile industries in North America and the services industry in emerging Asia

In Asia and North America, dynamic private demand continues to improve sector risks. According to the synthetic risk indicator developed by Coface economists and enhanced by its underwriters’ experience of companies’ payment behavior, the improvement in credit risk is focused on these two regions.

In North America, automobile and retail risks eased from ‘medium’ to ‘moderate’ on a positive trend in household consumption.

The automobile industry has seen new car sales return to pre-crisis levels, boosted by renewal requirements. In parallel, automakers’ cash flows have increased 19% over the last year. In the Canadian and US retail, sales have risen 3.9% for online and traditional retailers over the last year. Turnover, up 5% at end-October 2013, also reflects this renewed buoyancy.

In emerging Asia, Coface considers the services industry’s credit risk to be ‘moderate’. Turnover and profitability have increased noticeably on the back of corporate services, notably IT and engineering. Across the region, the emergence of a Chinese middle class is boosting tourism in Asian countries, a trend that will benefit from rising Chinese consumer income in the years ahead.

In Western Europe, risks are broadly stabilizing as the Eurozone climbs out of recession. But sluggish domestic demand in Southern Europe is affecting European sector risks, and no one sector yet has ‘moderate’ credit risk.

To read the full report click on this link: 20130106CE-HKen