Fitch says revenue, profit declines 'likely' for some US non-financial sectors in 2023

By Ovunc Kutlu

ISTANBUL (AA) - Fitch Ratings said revenue and profit declines are likely this year for some US-based non-financial corporate sectors, especially for those that are economically sensitive.

"The economic recovery following the pandemic-driven recession was supported by low interest rates, strong demand and pricing power that bolstered corporate revenue and margins," the rating agency said Monday in a statement.

"However, monetary tightening and slower economic growth will negatively impact demand while easing inflation will reduce pricing power, leading to lower revenue growth and less ability to protect margins, absent cost cutting, for some U.S. companies," it added.

Fitch noted it estimates the American economy will grow 1% this year, down from 2.1% in 2022, as there are still possibilities of an economic recession in the late third quarter.

While US consumer inflation is forecast to be 3.7% by the end of 2023, down from 6.5% at the end of 2022, the Federal Reserve's policy rate is anticipated to be near 5.5% in 2023, according to the agency.

Annual consumer inflation in the US came in at 5% in March, marking a sharp decline from June's record 9.1% yearly gain, after the Fed's interest rate increases totaled 425 basis points on seven occasions last year.

The US central bank later made a rate hike of 25 basis points Feb. 1, followed by another hike of 25 basis points on March 22 that carried its benchmark funds rate to a range of 4.75% to 5%.