Fitch Ratings: North American Sectors Face Deteriorating Outlook Amid Economic Slowdown and Challenges
Fitch Ratings warns of a deteriorating outlook for North American sectors, citing factors such as slowing economic growth, rising unemployment, and stringent financial conditions
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Fitch Ratings reported on Friday that the prospects for most sectors in North America are diminishing due to a slowdown in economic growth, increased unemployment, and stringent financial conditions.
"While U.S. growth exceeded expectations at 2.4% in 2023, we anticipate a decline to 1.2% in 2024, with a modest recovery projected for 2025," stated the report. "Despite a gradual easing, core inflation persists above central banks' 2% targets."
The rating agency identified key risks such as prolonged elevated interest rates, financial market fluctuations, constrained funding conditions, decelerating economic growth, and challenges to pivotal asset classes like real estate and structured finance.
"Profits are diminishing across various sectors, with an anticipated further deceleration in demand as the economy adjusts to the delayed impact of heightened interest rates and tightening credit conditions," noted the report.
It highlighted that escalating unemployment and the increased cost of living pose significant challenges for consumer-oriented industries and asset classes, putting additional pressure on the asset quality and operating profits of U.S. banks.
Fitch expressed a neutral outlook for Canadian banks, noting their adaptation to the heightened rate environment. Meanwhile, the life insurance sector in the U.S. shows signs of improvement as insurers continue to benefit from elevated interest rates.
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