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Coface Sector Review: Tentative Signs of Improvement in Europe


In its most recent Panorama economic publication, global credit insurer Coface reviews 14 key sectors in North America, Emerging Asia and Europe. The Panorama also takes a detailed look at the European airlines industry.


To read the full Panorama, click here.


Western Europe: Metal and automotive industries no longer "very high risk"

Even though the eurozone recorded zero growth in Q2 2014, Coface forecasts that GDP growth for the year will be positive, at +0.9% after a contraction of -0.4% in 2013. This trend is illustrated by an improvement in the automotive and metal sectors,which have long been considered as "very high risk."These now join the category of "high” risks.


Ten consecutive months of rising auto sales have benefited parts manufacturers, and the market has become more dynamic in Germany, the UK and Spain. This recovery extends to the metal sector, where the sales and profitability of companies have greatly improved. However, although investments are picking up, the sector remains handicapped by persistent overcapacities.


The other twelve sectors that Coface rates in Western Europe continue to post "high" or "medium" risk. Despite the stabilization in the region, and in contrast to North America and emerging Asia, no European sector has yet reached a risk level that can be considered "moderate."



North America: Majority of sectors at "medium risk"

Supported by balanced growth and dynamic consumption, North American companies have a stable outlook, despite the difficult weather conditions in Q1 2014. The majority of sectors remain in the "medium" risk category.


The outlook is positive for the automotive industry, which saw sales increase by 4.6% at the end of July 2014, compared to the previous year. In the chemicals sector profitability increased by close to 12% at the end of June 2014, over one year, due to access to cheaper energy and raw materials.



Emerging Asia: Paper/wood and construction sectors downgraded

Contrary to Western Europe and North America, where risks are tending to stabilize, emerging Asia is following a reserve path, despite sustained growth in China and India. Due to the process of consolidating over capacities currently underway, stocks are accumulating and company debt is increasing.


The metal industry has seen steel prices fall. It is the only Asian industry to be assessed as a "very high risk" sector since last April.


The deterioration of sector risks continues in construction and paper/wood. Construction, threatened by weakened demand, more severe credit conditions and the appearance of ghost towns in China, moves from “medium” risk to “high” risk. The increase in insolvencies of SMEs in the paper industry, combined with overcapacities, leads Coface to downgrade the risk in the paper-wood sector to "medium."


Annie Lorenzana

North America
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