Global credit quality continued to improve in the third quarter, with credit rating upgrades exceeding downgrades, Moody’s Investors Service says in its quarterly update of rating actions, reviews and outlooks.

The ratio of upgrades to downgrades was 1.62 in the third quarter, an improvement on the 1.53 ratio of the second quarter, which in turn had been an improvement on the 1.44 ratio of the first quarter of the year, Moody’s says.

The pace of credit improvement, however, lagged in North America, where the upgrade-to-downgrade ratio was only slightly better than one, at 1.09, compared with 1.97 in Europe, the Middle East and Africa, 4.50 in Asia-Pacific, and 6.33 in Latin America, according to Moody’s.

Moody’s also notes that some upgrades last quarter were a result of the application of a new joint default methodology, which Moody’s now uses when rating government-related issuers.

Looking ahead, Moody’s vice president Praveen Varma says the upward trend in credit quality should moderate in the coming months, judging from the distribution of ratings on review and rating outlooks.

“Overall, there are more issuers on review for downgrade or with negative outlooks than on review for upgrade or with positive outlooks,” Varma says. “However, the distribution of issuers on review for upgrade or downgrade shows strong regional variation.”

In North America, there are more issuers on review for downgrade than on review for upgrade, indicating credit quality will most likely deteriorate, explains Varma, while both the Asia-Pacific and Latin America have more issuers on review for upgrade than downgrade. In the EMEA region, in turn, the two groups are roughly even in number.

Rating actions last quarter reveal that particular industries are facing a challenging credit environment, with downgrades concentrated in airlines, automotives, and the chemical industry, the rating agency adds. “With recent bankruptcies in the airline and the automotive industries, it is possible that these industries will continue to see further credit stress,” it says. “Benefiting from a disproportionately large share of upgrades, in contrast, were aerospace and defense, packaging, mining & metals, and the telecom industry.”

Moody’s also reports that credit quality improvement was concentrated among speculative-grade rated companies, with roughly twice as many speculative-grade issuers with upgrades than downgrades in the third quarter. Among investment-grade companies, upgrades outnumbered downgrades only marginally.