Weekly economic and financial commentary

Summary

United States: Running on Empty

• Consumers staying power is showing signs of running out as inflation persists and confidence moves sharply lower. While consumers still have the ability to rely on their balance sheets to support spending, it's uncertain for how much longer they will continue to do so. Piling on the tough news was the weak ISM manufacturing report for June, which illustrates that we are not just seeing weakness out of the consumer, but investment spending as well.
• Next week: ISM Services (Wed), Trade Balance (Thu), Nonfarm Payrolls (Fri)

International: China's Economy Starting to Recover, U.K. Recession Seems Inevitable

• This week, we received further evidence that China's economy is on the road to recovery from its lockdown-induced slump. On the other hand, as U.K inflation accelerates further this year, and we expect the U.S. economy to slow late this year and fall into recession during 2023, we believe that could also be enough to tip the U.K. economy into recession by early next year.
• Next week: Reserve Bank of Australia (Tue), Central Bank of Peru (Thu), Mexico CPI (Thu)

Credit Market Insights: Pay Ya Later

• Consumers have increasingly relied on their balance sheets to fund spending, and as consumers tap credit, a less traditional service, Buy Now, Pay Later, has received increased attention. This week, we unpack what we know and importantly what we do not yet know about the service.

Topic of the Week: U.S. Recession Is Likely, and Global Contagion Is Unavoidable

• Inflation has trended uncomfortably high in many countries around the world, even as policymakers have ramped up monetary tightening cycles. The worldwide 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.

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