Previously positive rating momentum slowed for the U.S. Public Finance (USPF) sector, which saw a relatively even split between upgrades and downgrades in 3Q23. Fitch Ratings upgraded 25 USPF ratings and downgraded 27 during the quarter, compared to 61 and 20, respectively, in 2Q23. Upgrades represented approximately 2.7% of rating activity in the quarter, while downgrades represented approximately 2.9%. Six of eight USPF sector outlooks are deteriorating, with the remaining two at neutral relative to 2022. The number and distribution of rating actions continues to underscore credit stability within the sector. Similarly, Rating Outlooks are overwhelmingly Stable, even in the face of weaker operating conditions, representing 90.9% of the portfolio. Positive Rating Outlooks/Watches represented 5.3% as of 3Q23 quarter end, while Negative Rating Outlook/Watches represented 3.8%. Revenue growth is beginning to slow for U.S. States and Local Governments; as such, an expected recession in 1H24 will weaken macroeconomic conditions facing U.S. states and local government entities. However, Fitch’s measures of overall credit quality should remain stable and strong given prudent efforts in recent years to bolster financial resilience. In the Not-For-Profit Hospital sector, providers remain under considerable pressure, particularly with respect to labor challenges, general inflation and equity market volatility.
Wed 18 Oct, 2023