China First, US Next

The global economy is experiencing a slowdown, with significant challenges evident in the US, China, and Europe. In the US, GDP growth accelerated to 2.8% in the second quarter, driven by key US GDP drivers such as inventory build and US private domestic investments in equipment, which increased by 11.6%. However, the sustainability of this growth is uncertain due to the looming AI bubble risk and substantial Global fiscal risks posed by the near 7% budget deficit, limiting future fiscal and monetary stimulus.

China's economic downturn is more pronounced, with GDP growth halving in the second quarter. Chinese retail sales grew by a mere 2% in June, reflecting plummeting Chinese consumer confidence. The housing market crisis is deepening, evidenced by the collapse in China mortgage applications. The communique from China's Third Plenum provided no new measures to address the downturn, indicating a shift towards China's tech ambition and long-term China tech investment rather than immediate economic relief.

Europe faces its own set of economic challenges. The July European manufacturing PMI reveals a significant loss of momentum, particularly in Germany, where German business activity hit a five-month low. This prolonged slump, ongoing since the Ukraine war, suggests a lasting impact on Germany’s structural growth rate. France, expected to benefit economically from the upcoming Olympics, is instead grappling with a French tourism slump, heightened France political uncertainty, and serious France fiscal challenges. Political tensions have intensified following recent elections, complicating the implementation of essential French economic reforms like the contentious France pension reform.

The global economic outlook is precarious, with the IMF forecasting modest growth rates of 3.2% this year and 3.3% in 2025. However, these projections may be overly optimistic due to significant risks such as the potential bursting of the AI bubble and fiscal crises driven by unsustainable deficits in major economies. In China, the weak fiscal position limits the government’s ability to support the housing market. In France, rising borrowing costs due to fiscal challenges add to economic pressures.

In summary, the US economic outlook remains cautiously optimistic but is shadowed by the AI bubble and fiscal constraints. China prioritizes tech ambitions at the expense of immediate stability, with declining consumer confidence and retail sales amid a housing crisis. Europe deals with the Ukraine war's impact on German business activity, French political uncertainty, and a tourism slump, all compounded by fiscal challenges and pension reform issues. These interconnected global economic issues highlight the need for careful management to navigate the anticipated downturns. David Woo, a former top-ranked Wall Street global macro strategist tells it as it is. You may not agree with everything he says but he will make you reassess everything you thought you knew.
#GlobalEconomy #USEconomicOutlook #ChinaEconomicTrends

Chapters:
0:00 Intro
0:48 Heading Towards a Global Recession?
3:38 What about China?
6:19 What about Europe?
8:56 My Predictions

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