Are euro area companies financially vulnerable?

The cyclical downturn observed since late 2018 and the prospect of weak growth and low inflation out to 2020 raises the question of the vulnerability of non-financial corporations (NFCs) in a tougher macroeconomic environment. Could e uro area companies financially withstand a deterioration in conditions? In order to assess the financial vulnerability of NFCs, we consider four indicators representing their debt risk, exposure to change in funding conditions , profitability risk and investment behaviour . Our findings show that European corporates overall have a high degree of resilience. The one weak spot at this point seems to be profitability as our profitability indicator has fallen below its average since the 200 1 s. The debt dynamics don’t seem to show any sign of deterioration and exposure to change in funding conditions seems to be smaller than in the past. Corporate investment, meanwhile, is particularly vigorous, with our indicator sitting above 92% of the values observed since 2001.