Link to Fitch Ratings' Report: Fitch Fundamentals Index US (4Q14)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=857028
The Fitch Fundamentals Index (FFI) remained in neutral territory, climbing to +1 for 4Q'14 on trends that included generally higher transportation volumes and continued improvements in mortgage performance, offset by negative factors including expectations of lower CAPEX growth.
"The decline in crude oil prices has triggered exploration and production (E&P) firms with large North American shale projects to cut exploration spending. The cuts are likely to extend beyond E&P to include oil services firms and industrials with order books linked to large oil production projects," said Jeremy Carter, Fitch Ratings Managing Director.
The FFI capital expenditures forecast sub-component score remained negative as the median U.S. company is expected to freeze or cut spending over the coming 12 months. The rapid slide in crude oil prices since mid-2014 has led many oil and gas companies to cut planned capital spending for 2015.
The energy high-yield default rate could rise as crude oil prices hover near six-year lows and are likely to remain depressed in the near-to-medium term. 'CCC' and lower rated energy bonds now account for 22 percent of all outstanding high yield energy bonds versus 13 percent in 2013.
Fitch's composite index of transportation volumes across air freight, seaports, toll roads and passenger air travel rose by 2.8 percent year-over-year in 4Q'14, triggering an increase to positive from neutral in the FFI sub-component score. The uptick was caused by toll road volumes, up 4.8 percent year-over-year, and air freight and air passenger traffic, which were both up by 3.4 percent on an annual basis.
However, seaport freight volumes grew by just 0.2 percent year-over-year. The slowdown may be due to the long-running labor dispute at major West Coast ports and slower growth in international sea-borne freight, reflecting a broader pattern of diminished international trade activity.
Fitch Fundamentals Index
The Fitch Fundamentals Index (FFI) tracks changes in credit fundamentals across key sectors of the U.S. economy. Analyzing the relative strength or weakness of the index or its sub components can provide insight into how conducive conditions in the U.S. are towards economic growth.
The trend in potential drivers or constraints on economic growth or decline is indicated by the relative strength or weakness of the FFI, ranging from +10 to -10. The FFI's components include mortgage and credit card performance, corporate defaults, high-yield recoveries, ratings outlooks, EBITDA and CapEx forecasts, banks, the CDS outlook, and transportation trend. Released quarterly, the FFI relies primarily on proprietary Fitch-sourced data.
To learn more about the FFI, please visit 'www.thewhyforum.com/ffi'.
Fitch Ratings
Fitch Ratings is a leading provider of credit ratings, commentary and research. Dedicated to providing value beyond the rating through independent and prospective credit opinions, Fitch Ratings offers global perspectives shaped by strong local market knowledge and deep credit market experience. The additional context, perspective and insights we provide help investors to make important credit judgments with confidence. For more information, visit 'www.fitchratings.com'.
Fitch Group is a global leader in financial information services with operations in more than 30 countries. In addition to Fitch Ratings, the group includes Fitch Solutions, an industry-leading provider of credit risk products and services, and Fitch Learning, a preeminent training and professional development firm. Fitch Group is jointly owned by Paris-based Fimalac, S.A. and New York-based Hearst Corporation.
Additional information is available at 'www.fitchratings.com'.
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