As defaults spike, sectors downgraded.

Coface, the country risk and credit rating service, is reporting payment defaults increasing 45 percent over the first four months of 2008 compared to the same period in 2007. "This is a clear sign of the beginning of a credit crisis," the agency noted in an announcement, "even after taking into account that the indicator, based on statements from Coface insured clients in 65 countries, traditionally overreacts at the start of a crisis. For this reason, Coface confirms its January forecast of a crisis less significant overall than the crisis of 2001-2002, which was marked by a 30 percent increase in payment incidents."

The financial crisis has rippled through to the global economy in two ways, Coface claims. First, American demand is reduced, mainly affecting North America and U.S.-oriented countries and sectors. Second is the increased difficulty in access to bank credit. Added to these factors are higher prices for raw materials and energy, the appreciation of currencies outside the dollar bloc and very stiff competition. For the moment, France and Germany are only slightly affected by these developments, the agency said.

Coface also downgraded a number industry sectors in different global areas, as indicated in the table above.

RELATED ARTICLE: Downgraded Sectors By Region

North America

Mass distribution

(from A-negative outlook to B+)

Apparel (from C to C-)

Automotive (C to C-)

Construction (B- to C+)

Air transport (C+ to C)

Electronic components (A to A-)

Western Europe 

Paper (B+ negative outlook to B)

Construction (from B to B-)

Source: Coface release, late May