S&P 2012 U.S. default rate 2.6%; economic activity 'slightly better'

By Caroline Salls

Pittsburgh, Jan. 28 - Standard & Poor's said that 39 U.S. corporate speculative-grade entities defaulted in 2012, resulting in a trailing 12-month speculative-grade default rate of 2.6%.

According to an S&P report released on Monday, the 39 U.S. defaults were 11 fewer than the agency expected in its baseline default forecast at the beginning of the 2012.

The default rate fell between S&P's 3.3% baseline and 1.8% optimistic default forecasts for the year.

The ratings agency said economic activity in the United States was slightly better last year than it had expected, and the unemployment rate declined faster than anticipated.

S&P said the U.S. economic recovery is showing improved momentum. In its default forecast for 2012, the agency said it had expected the economy to expand by 2%, but the latest data from the Bureau of Economic Analysis suggests that estimated real GDP grew about 2.3%.

S&P also said more than 1.8 million new jobs were created last year, which helped push the unemployment rate down to 7.8% in December, much lower than the agency expected a year ago.

In addition, S&P said the Federal Reserve's willingness to spur liquidity in the financial markets helped ease investor concerns and further depressed benchmark rates to record lows.

Despite persistent worries in Europe and the Middle East, S&P said that investors provided ample liquidity in the credit markets, which, together with the improving U.S. economy, may have helped delay or even avert some defaults.

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