World Economic Outlook

August: The U.S. banking sector keeps on sinking

The world economy is slowly sinking. It's carried basically only by massive fiscal stimulus. In this report, we detail the darkening economic picture in the U.S. (despite the “surprisingly” positive GDP print), China de-leveraging spelling trouble for the world economy and the deepening woes of the U.S. banking system, where the outflow of deposits has continued.

GDP Scenario Forecasts

(GnS Economics, OECD, Atlanta Fed, Statistics Finland, Q-to-Q).

Our first nowcasts for Q3 (note that the Q2 figures for the Eurozone and Finland are preliminary estimates), show a continuing positive movement for the U.S. and Eurozone economies. The economy of Finland would fall into a recession this quarter.

Our forecasts indicate that the positive economic momentum would continue to fall from here on, with recession starting in every country/region early next year. Uncertainty continues to be high, as we have noted several times. That is why we will not delve deeper into the forecasts this time around.

China stimulus

De-leveraging. The flow of aggregate financing into the Chinese economy grew by just RBM700 billion in July. The flow of financing to the Chinese economy is now at the levels of 2021, which was a year of de-leveraging after the massive stimulus in 2020. We can now conclude that Beijing is trying to de-lever the Chinese economy, once again. This is visible, e.g. in the manufacturing PMI:s reported below.