Despite prevailing uncertainty and a fragile recovery, global industry outlooks are starting to brighten, says Moody’s Investors Service in a new report.
The rating agency said its latest analysis of non-financial corporate outlooks finds that the trend in fundamental business conditions for various industries over the next 12 to 18 months has shifted to mildly positive.
As the new year dawns, seven of 28 industry sectors now have positive outlooks, up from zero in mid-2020, Moody’s said.
The rapid improvement in sector outlooks in the second half of 2020 “reflects the positive impact on business conditions of the easing of widespread lockdowns,” the rating agency noted.
However, there remains a high degree of uncertainty about the effects of the pandemic, which may inhibit future improvements, Moody’s cautioned.
“Despite the rapid development of coronavirus vaccines, it will be many months before they are widely available, so the end of the pandemic remains difficult to predict,” Moody’s said, adding that in a downside scenario of renewed global lockdowns, business outlooks would likely turn sharply negative once again.
“Resurgent coronavirus infections that slow an economic recovery would strain non-financial companies still reeling from the sharp downturn in early 2020,” Moody’s said.
Conversely, if a return to more normal conditions develops, Moody’s said that it would expect more upward revisions to sector outlooks.
The sectors that are most directly damaged by the virus itself will recover fastest as the pandemic fades, Moody’s said, whereas sectors that are hurt more by the resulting economic slowdown are more dependent on the overall recovery.
“We believe the recovery could stall without additional liquidity support from central banks and governments,” Moody’s said.