Disclaimer: Views in this blog do not promote, and are not directly connected to any L&G product or service. Views are from a range of L&G investment professionals, may be specific to an author’s particular investment region or desk, and do not necessarily reflect the views of L&G. For investment professionals only.
Chart of the month: Credit tightening implies weaker US GDP growth
The link between credit conditions and GDP growth adds conviction to our view that a US recession is likely this year.
The US Federal Reserve’s latest survey of senior loan officers in the US found a majority reporting that their banks were set to tighten credit conditions. And this was before the recent bout of banking stress – chances are that credit conditions will have tightened more since then.
Given over the last thirty years the chart suggests a potential link with GDP growth, this adds to our confidence over a recession in the US this year. We don’t think equity market valuations reflect this, and we therefore see further downside risk from here.
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