Increased financial pressure is heading down the pike, with a mild recession likely in the months ahead. That’s according to commentary from Fitch Ratings.
Inflation, labor shortages and higher capital costs, combined with the Federal Reserve’s “aggressive Federal Reserve monetary policy tightening” and recent banking sector concerns point to potential economic contraction, according to Fitch Managing Director and Head of US Public Finance Arlene Bohner.
The outlook is more balanced for continuing care retirement / life plan communities than it is other sectors, according to Bohner, with one public finance rating upgrade and no downgrades in the first quarter. Limited coronavirus outbreaks and favorable demographic trends have allowed for stable to improving occupancy across most communities, she said.
But overall, economic pressures are creating a ripple effect for state and local government ratings.
“With a handful of states already reporting revenue declines, fiscal pressure could escalate if economic conditions deteriorate rapidly, though most states are well-positioned to absorb a moderate economic downturn,” Bohner said. “Despite a ‘deteriorating’ sector outlook for 2023, states and local government ratings will remain stable.”
Fitch Ratings upgraded 38 US public finance ratings and downgraded 12 in the first quarter, which is on par with the fourth quarter of 2022, which saw 43 upgrades and 18 downgrades.
“Healthcare providers remain under considerable pressure, particularly with respect to labor, inflation and equity market volatility, with elevated downgrades and negative outlook actions in the coming quarters likely,” Fitch said.
