SigmaQ Corporate Default Risk Technology

The latest economic data has only added to the already mixed basket of economic indicators seen in recent months. Given this muddled information, it is beneficial to use more specific indicators to get a better picture of how the global economy is actually developing amid the seemingly contradictory information.

Let’s take a look at the real economy: A.P. Moller-Maersk has just published its 2022 annual report and announced the best financial result in its long corporate history. Maersk is one of the largest shipping companies in the world, operating in more than 130+ countries. As Maersk is a truly global company, deeply involved in world trade, its economic condition can very well be seen as an indicator of the health of the world economy.

Digging deeper into the annual report, several observations stand out. First, the report notes that the exceptional result was due to post-pandemic catch-up effect rather than sustained high demand, and that this demand started slowing down in the second half of 2022, leading to a normalisation. This is confirmed by the SigmaQ PD (probability of default) for Maersk, which is shown in the figure below.

The impact of the pandemic on Maersk’s PDs dissipated quickly in 2021, resulting in the lowest PD levels in recent years in the post-pandemic period. However, since mid-2022, there has been some rebound in PDs, which is very consistent with the report’s statement of softening demand in the second half of 2022.

A look at some of Maersk’s competitors largely confirms this picture and is again supported by SigmaQ PDs, as shown in the figure below:

But what about the economic outlook? Here, the report states that, at least “immediately ahead, global economic growth is expected to be weak in 2023, around 1.5%, with major economies going into recession. Consumer spending growth will slow further and the overconsumption of goods during the pandemic period risks a sharp correction in demand.” Together with the all-too-familiar geopolitical risks, this outlook for 2023 clearly paints a less rosy picture.