The US economic cycle is not a straightforward transition from slowdown to rapid acceleration, but rather a delay in the cycle, a mismatch of different stages, and temporary deviations due to unexpected events. Currently, the market's expectation for a "soft landing" of the US economy depends on whether there will be a further expansion of credit.
United States GDP Growth Rate
This depends on whether the current tightening measures are sufficient to erode new demand and interest payments on existing debt, and whether any unexpected events can change the direction of this tightening.
The difficulty in continuing to implement policy support due to the upcoming election year makes it challenging to implement fiscal policies.
The slow contraction of the US credit cycle is due to the fact that the general investment return rate has always been higher than the financing cost, and high interest rates have limited transmission of pressure to existing debt payments, resulting in slow growth and inflation decline.
Moreover, the government's credit expansion in the second quarter of this year due to the resolution of the debt ceiling and bank risk exposure offset private sector contraction and became the "source" of economic acceleration in the third quarter. Therefore, whether credit will expand again depends on whether the private sector's tightening measures are sufficient and whether the government will make further efforts. This question can be analyzed by examining the pressure on each sector's stock and incremental credit.
The increase in financing demand has been suppressed, and the current financing costs for enterprises and residents have exceeded their investment return rates, making it difficult for government credit to expand significantly.
The growth of new financing demand has been suppressed, and the current financing costs for enterprises and residents have exceeded the investment return rate. The expansion of government credit is also difficult.
For the residential sector, the 8% mortgage interest rate has exceeded the 7% rental return rate, and the sales of existing homes and mortgage growth have continued to decline.
United States 30-Year Mortgage Rate
However, the adjustment of BEA data in September resulted in an increase in excess savings, with excess savings reaching approximately $1 trillion as of the end of September. It is expected that the depletion point may be postponed to the end of 2024. There are still significant differences among different income groups, with low-income groups struggling to make ends meet and their excess savings exhausted at the end of last year, leading to increasingly frequent "strikes". The consumption elasticity of middle and high-income groups is weak, and the proportion of significant expenditure increases may be smaller. Therefore, looking ahead, consumption resilience still exists, but the possibility of a significant acceleration is not great.
United States Unemployment Rate
For the enterprise sector, financing costs have exceeded the investment return rate as a whole, and new credit demand has declined. The decline in corporate bond issuance and commercial loans further confirms the suppression brought about by tightening measures.
United States ISM Manufacturing New Orders
The issuance of US corporate bonds continued to decline, with a quarter-on-quarter decrease of 15% to $330 billion in the third quarter; the absolute scale of corporate commercial loans has also continued to decline since the end of last year, and the growth rate has fallen from 13.5% at the end of October last year to -1.1% currently.
For the government sector, it is difficult to expand significantly in an election year. It is often difficult to significantly expand the basic deficit in an election year (especially when the president and the House of Representatives belong to different parties). The scale of bond maturities next year is basically flat compared to this year, and TGA replenishment has also been completed. Therefore, unless unexpected events such as bank risk occur again, fiscal credit is difficult to expand significantly. Recently, the auction of long and short-term US bonds has been very quiet. Unless more international buyers intervene to increase market supply and demand balance.
United States Government Debt
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