Moody’s Investors Service says in a new report that global credit quality improved last quarter, but the rate of improvement slowed.

In Europe and North America credit rating upgrades and downgrades were roughly balanced, leading to no change in credit quality overall, Moody’s said. Globally, the ratio of upgrades to downgrades stood at 1.4 last quarter, down from 1.8 in the last quarter of 2004.

At the end of March, 2.4% of issuers were on review for upgrade, verses 3.6% at the end of December, suggesting the pace of upgrades will continue to decline. Upgrades continue to be concentrated in the Asia-Pacific region, although much less so than in the previous quarter, said Moody’s.

Roughly 6.5% of the issuers in the Asia-Pacific region were upgraded last quarter, compared to about 25% in the fourth quarter of 2004. “Further upgrades are likely,” said Moody’s vice president/senior analyst Praveen Varma, as 4.1% of issuers in the region were on review for upgrade at the end of March.

Latin America, the Middle East and Africa also saw a significant number of upgrades, with 7.9% of issuers in the Middle East and Africa and 4.7% of issuers in Latin America being upgraded, Moody’s said.

In North America last quarter 2.9% of issuers were upgraded, compared to 2.7% being downgraded. Europe saw the lowest amount of rating activity, where about 1.8% of issuers were upgraded and 1.3% were downgraded.

Looking ahead, Moody’s notes the share of issuers on review for downgrade exceeds the share on review for upgrade in both regions. “Future rating actions are also likely to be more concentrated among speculative-grade issuers rated Ba or single B,” Varma said, which account for 33.2% of the issuers on review for upgrade and about 20% of the issuers on review for downgrade.

Looking at the distribution of rating actions across industries, Varma noted that upgrades in first quarter were fairly evenly distributed. Downgrades, however, were concentrated in the consumer sector, which accounted for 48% of all downgrades in the first quarter. He said he expects the sector to continue to see a high proportion of downgrades, as issuers in the sector constitute 45% of issuers on review for downgrade, and 48% of issuers with negative outlooks.