This suggests that the US corporate sector has proven relatively resilient to the turmoil thus far. However, the outlook for the US non-financial corporate sector has deteriorated. As shown in Chart 2, US corporate profits fell further in the second half of 2008. Both domestic profits and those from the rest of the world contributed to the decline on a year-on-year basis.
The turn in the corporate credit cycle has also been reflected in the rise of speculative-grade corporate default rates since the end of 2007, which over the course of the next 12 months are projected to reach levels far above the peaks in the early 1990s and in 2001.