Fitch Ratings says in a report that the consumer environment in Europe will continue to recover in H210, though the pace of improvement will be slow.
"Sales growth will be hampered by further increases in the unemployment rate, which is likely to reach 11% in the region by Q410. In addition, while consumer confidence has strongly recovered from its low point in H109, the consumer confidence index has been essentially flat in the year to date," says Philip Zahn, Senior Director in Fitch's Retail and Consumer Products team.
Despite these challenges, Fitch believes that business conditions for European consumer and retail groups will not worsen significantly, and that companies will continue to manage their businesses and balance sheets in a conservative manner.
Fitch believes that companies will size their share repurchase programmes so that leverage remains within long-term targets. Also, while M&A activity may accelerate over rest of the year, most transactions should be of a manageable size and, as a result, credit metrics should continue to improve for most companies.
