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Despite ongoing inflation pressures and lurking pandemic threats, credit conditions for investment-grade issuers are expected to perk up in the year ahead, Fitch Ratings reports.

The rating agency expects credit metrics for North American investment-grade companies to improve in 2022 as issuers “are generally well positioned to absorb inflationary pressures, typically through pricing power, and possible spikes in coronavirus cases.”

“Revenues and margins will continue to grow despite supply chain and inflationary headwinds,” it said, adding that it expects free cash flows to be used to reduce debt, “resulting in lower leverage.”

Fitch reported that 84% of the 540 North American investment-grade issuers it rates have stable outlooks, which is “consistent with the pre-pandemic mix and an improvement from 71% in 2020.”

While companies with negative outlooks outnumber firms with positive ones, they’re concentrated in sectors that have been hit particularly hard by the pandemic, including REITs and gaming, lodging and leisure.