Fitch: Spain Fundamentals Index Unchanged at '+5'

The Spanish Fitch Fundamentals Index (FFI) held steady at +5 in 4Q15 as a deterioration in ABS performance was offset by an improvement in Rating Outlooks.

Trends in transportation, unemployment, new credit and SME delinquencies remained strongly positive and are the main drivers of the overall positive index reading. The quarterly reading was the ninth positive score in a row and indicates credit conditions are still improving, although the pace has slowed slightly from 1H15.

The CDS outlook was the only negative component as spreads tightened slightly in 4Q, but were significantly wider than a year earlier. This is similar to the moves in the broader CDS market in 2015. Fitch Solutions' European banking, telecommunications, and utility indices show that spreads tightened into year-end, but were unable to fully reverse the widening in 2Q and 3Q.

Not all sectors tightened. CDS spreads on European oil and gas companies widened a further 7% as oil continued to drop and investors and analysts pushed back their expectations for a recovery in prices.

The FFI tracks changes in credit fundamentals across key sectors of the Spanish economy. Analysing the relative strength or weakness of the index or its sub components can provide insight into whether conditions in Spain are conducive to economic growth.

The trend in potential drivers or constraints on economic growth or decline is indicated by the relative strength or weakness of the FFI, ranging from +10 to -10. Released quarterly, the FFI relies primarily on proprietary Fitch-sourced data. The FFI's components are mortgage, SME and ABS performance, EBITDA and capex forecasts, rating outlooks, the CDS outlook, new credit, unemployment forecast and transportation trend. As a result, the index provides a complete picture of the health of the Spanish credit markets.