It was all too easy to presume the downturn would start in the US. After all, the US was at the forefront of the global cycle, enjoyed the sharpest post-Covid rebound and then suffered the biggest number of rate hikes. Add in banking instability at the beginning of 2023. But assumptions have turned out wrong: the Atlanta Fed’s GDP Nowcast sees growth of more than 5.5% in the third quarter.
ZONES ARE NOW TAKING DIVERGENT CYCLICAL PATHS
In stark contrast with the US, China and Europe have seen a marked economic downturn. Growth in the US is exceeding even the most optimistic expectations but China is facing increasing signs of deflation and Europe is, at the very least, moving towards contraction territory.
THE IMPROBABLE SYSTEM OF EUROPEAN EQUATIONS
How can an economy grow by 4% without borrowing? Bank lending to the economy has contracted, albeit very slightly, since November 2022. The ECB’s Bank Lending Survey suggests that demand for loans, particularly from companies, has fallen just as much as supply from banks. Tougher lending conditions are not in any way due to banks facing difficulties but to various other developments. Since the end of negative rates, margins on deposits have risen so banks have less need to lend, especially in such an uncertain environment. And with the TLTRO1 reimbursements, banks no longer have one incentive to lend. ECB surveys suggest lending conditions will not get much tighter but there is no reason to think lending will recover, especially as higher rates are weighing on demand. We think this situation is untenable so the outlook is clouded: if bank lending fails to recover, growth and/or inflation could surprise on the downside.
Sur le même sujet :
- Amérique latine : la “doctrine Donroe” rebat les cartes pour les investisseurs
- BCE : faut-il vraiment craindre une remontée des taux en 2026 ?
- Chine : un virage stratégique vers l’innovation et l’autonomie
- Pétrole à 100 $ : un choc sous-estimé par les modèles économiques ?
- Japon : la fin de la déflation ouvre un nouveau cycle
