Swings and roundabouts

But, theres so often a but, its also clear that, in many of those countries, this positive movement is driven by some elements of their economies, while others are still hampering recovery.

In the US, for instance, the rebound in the first three months of this year has been generated by consumer spending and business inventories, while construction remains in the doldrums. Building has also prevented a stronger recovery in the Czech Republic, although overall business and consumer sentiment is improving. In Austria, Belgium and the Netherlands it is domestic consumption that is currently dampening a comprehensive economic revival, while exports begin to blossom again.

One of the most important factors that any business needs to know is the trend in insolvencies in their markets. The following Expected Default Frequency [EDF] chart is based on listed companies in the markets referred to, and the likelihood of default across all sectors within the next year. In this context, default is defined as a failure to make a scheduled payment, or the initiation of bankruptcy proceedings. Probability of default is calculated from three factors: market value of a companys assets, its volatility and its current capital structure. As a guide, the probability of one firm in a hundred defaulting on payment is shown as 1%.

After the median EDF for some European economies showed some signs of stagnation last month, it came back to the generally improving downward trend that we have seen for several months. In March 2010, Germany and the UK recorded 7 and 8 basis point decreases, while all other countries registered even more encouraging double-digit EDF falls. After several months without movement, the modest Belgian EDF improvement seen in February 2010 accelerated to an 11 basis points decrease in March. Again the US recorded the best figures,15 basis points, and its median EDF is now below 1,4%.