Trade disruptions weighing on the economic outlook, and specific sectors’ prospects.

After enjoying a reprieve in April, global corporate defaults are expected to rise again in May, says Moody’s Ratings.

In a new report, the rating agency said that it expects global defaults to rebound this month, after a decline in April, as only eight issuers defaulted last month, down from 11 in March.

“The monthly default count will likely return to double digits in May,” Moody’s said, noting that it has already identified six defaults, and a few other companies, “have missed interest payments but are currently within grace periods, or have launched transactions that we will likely consider to be distressed exchanges when completed.”

Indeed, six of the eight defaults in April were distressed debt exchanges, it said.

“Financially weak companies use this approach to ease near-term debt burdens and address liquidity issues while preserving shareholders’ equity interest,” it noted.

By geography, North America has accounted for the bulk (70%) of the defaults this year, with most of the rest (22%) coming from the Europe, Middle East and Africa region.

Moody’s also has a weaker outlook for the global economy, due to the disruption in global trade, and increased U.S. policy uncertainty.

“While our current baseline scenario does not forecast a U.S. recession, we see risks tilted to the downside,” it said.

Additionally, the rising trade tensions have also led to gloomier sector outlooks, with three sectors — the energy, mining and retail sectors — all having their rating outlooks dropped from stable to negative.

“So far this year, defaults have come from a variety of sectors, led by retail, high tech and chemicals sectors,” it noted.

Against this backdrop, “The default rate will likely be in the range of 3% – 5% at year-end 2025, depending on how risks crystallize,” it said.

In particular, Moody’s warned that a “further escalation” in trade tensions, “would result in even worse economic outcomes and higher credit risk” — adding that, “the risk of economic disruption from geopolitical developments remains.”