KBRA Releases Research ? Uncertainty Reflected in Corporate Surveys
KBRA UK (KBRA) releases a report that explores the expectations and confidence among European corporate managers in the current economic environment. Challenges to corporate managers including the rapid rise in inflation, supply issues, and increased interest rates have created a great deal of uncertainty, as reflected in recent surveys. It is unsurprising that this perspective exists given the dramatic changes over the past three years. European corporate managers have faced the impacts of the COVID pandemic, supply chain shortages, the Russia-Ukraine conflict, and a rapid rise in energy prices. Managers currently face high interest rates and falling but still historically high inflation.
Key Takeaways
Economic and confidence indicators suggest broad uncertainty across European corporate managers, as reflected in surveys conducted by the European Commission (EC). Overall, economic sentiment has been recovering from a fall in early 2022, but at a slower pace than in the immediate pandemic aftermath.
Confidence levels in the construction sector are the lowest among the various sectors surveyed, including below the typically low-confidence retail sector. Meanwhile, the services sector shows the highest confidence levels.
Employment expectations are declining in Ireland, France, Germany, and the Netherlands but remain optimistic in Spain and Italy. Employment expectations are negative in Poland but appear to be stabilising from a fall in early 2022.
Sentiment surveys are only a point-in-time reflection of sentiment. The full long-term impact of higher inflation and interest rates is only beginning to manifest itself for European corporates and may lead to further downwards pressure on future sentiment surveys. Some respondents may be only partially factoring in prevailing headwinds.
KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA's ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.