<html> <head><style type ="text/css">body { font-family: "Bloomberg Prop Unicode I", Verdana, sans-serif; font-size:125%; letter-spacing: -0.3pt; color: #FF9F0F; background-color: #000000; text-align: left; } p {line-height: 1.25em; max-width:900px; width:expression(document.body.clientWidth > 900? "900px": "auto" );} h1, h2, h3 { text-align: left; font-weight: normal; color: #FFFFFF; } h1 { font-size: 130%; } h2 { font-size: 115%; } h3 { font-size: 100%; } #bb-style { font-size: 90%; max-width:900px; width:expression(document.body.clientWidth > 900? "900px": "auto" ); } b, strong { font-weight: bold; } i, em { color: #FEC54A; } pre { font-family: "Andale Mono", "Monaco", "Lucida Console"; letter-spacing: -0.3pt; line-height: 1.25em; } table { border: 0; font-size: 90%; width: 100%; margin-left: auto; margin-right: auto; } td, tr { text-align: left; } td.numeric { text-align: right; } a:link { color:#53B2F5; text-decoration: none; } a:visited {color:#53B2F5} a:active {color:#53B2F5} a:hover {color:#53B2F5} </style> </head> <body> <p>By George Anders</p>&#xD; &#xD; <p>Anyone wondering how badly the U.S. economy is stumbling should take a look at what's happening with corporate credit ratings.</p>&#xD; &#xD; <p>In boom times, ratings companies such as Moody's Investors Service, Standard &amp; Poor's Corp. and Fitch Ratings issue lots of upgrades as corporate finances strengthen. When trouble hits, downgrades become the norm.</p>&#xD; &#xD; <p>Over the past few years, the zigzags of this up/down ratio have closely matched changing economic conditions. In the first quarter of 2007, according to data compiled by Bloomberg, the up/down ratio for Moody's U.S. corporate ratings hit a peak of 2.16. The ratio plummeted to 0.09 in the first quarter of 2009, amid a torrent of downgrades. (A ratio below 1 means downgrades outnumber upgrades.) Earlier this year, the ratio provided relatively neutral readings close to 1.00.</p>&#xD; &#xD; <p>So how are we doing now?</p>&#xD; &#xD; <p>Not well. Since July 1, Moody's has issued just 60 corporate upgrades versus 134 downgrades. That amounts to an up/down ratio of just 0.45. Recently downgraded companies include Frontier Oil Corp., Sears Roebuck &amp; Co., Media General Inc. and Jack in the Box Inc.</p>&#xD; &#xD; <p>August is looking even worse. The Moody's up/down ratio has tumbled to 0.17, the lowest level since the second quarter of 2009. The numbers from S&amp;P are hardly any better. The up/down ratio on its ratings for August is 0.22.</p>&#xD; &#xD; <p>Credit ratings have been in the headlines lately because of S&amp;P's decision to cut the U.S.'s long-term debt rating one level to AA+ from AAA. Corporate ratings, which are evaluated by different teams inside the ratings companies, haven't attracted much notice. Perhaps they should.</p>&#xD; &#xD; <p>(George Anders is a member of the Bloomberg View editorial board.)</p> </body> </html>