Weekly Economic & Financial Commentary: U.S. Recession Is Likely, and Global Contagion Is Unavoidable

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Summary

United States: Running on Empty

  • Consumers who hold power are showing signs of exhaustion as inflation continues and confidence moves sharply lower. While consumers still have the ability to rely on their balance sheets to sustain spending, it is uncertain for how long they will continue to do so. Accumulating the hard news was the weak ISM factory report for June, which illustrates that we are not only seeing weakness from the consumer, but also investment spending.
  • Next week: ISM Services (Med), Trade Balance (Jun), Non-Farm Wages (Ve)

International: Chinese Economy Beginning to Recover, British Recession Seems Inevitable

  • This week, we received further evidence that the Chinese economy is on track to recover from its weakening induced by confinement. On the other hand, as UK inflation accelerates this year, and we expect the US economy to slow down later this year and fall into recession by 2023, we believe this could also be enough to turn the British economy into a recession early in the year. next year.
  • Next week: Reserve Bank of Australia (Tue), Central Bank of Peru (Thu), Mexico CPI (Thu)

Credit Market Experiences: Pay Later

  • Consumers have increasingly relied on their balance sheets to fund spending, and as consumers grab credit, a less traditional service, Buy Now, Pay Later, has received more attention. This week we’re unpacking what we know and importantly, what we don’t yet know about the service.

Theme of the Week: US Recession Is Likely, and Global Contagion Is Inevitable

  • Inflation has tended to be uncomfortably high in many countries around the world, even as policymakers have extended monetary tightening cycles. The global inflation problem has created an interesting dichotomy for the global economy, and as a result, we have made significant changes to our forecast profile for many central banks and economies.

Full report here.

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