To me your credit impulse chart looks closer to the end of an impulse than signaling an upturn, and it’s still in negative territory. China could see some demand turn up, but a renewed surge in investment seems unlikely. Most stimulus efforts have been consumption focused like the trade in program. US manufacturing is shedding jobs, and is an inventory restocking cycle really in the cards given tariff front running? Maybe when July 9 passes and there is a little more trade certainty out there. If anything this cyclical upswing seems like a 2026 phenomenon when the bulk of the reconciliation bill kicks in and hopefully all the trade related uncertainty is in the rear view.
Thinking out loud here mostly, and thanks for posting, very though provoking stuff.
G3 is weighted, so China+US+EU. China and US are both growing positively but negative contribution is being driven by the EU.
While still negative as you highlighted the flow of credit in Europe is lifting, and thus the strength we have seen from the trough has been optimistic.
As for manufacturing don’t disagree jobs are being shed, if we are focusing solely on USA less concerned.
The reason is capital > labor. Thus most of the growth I believe we will see in manufacturing will solely be a function of TFP (magic) and less about labor inputs.
We will be able to generate more output given the inputs into production (mostly driven by technological advancement).
So given that I think we will continue to see a surge in investment, too a point as capital investment does exhibit diminishing marginal returns to capital.
Re China In the last commodity boom they were building ghost cities which used alot of commodities. If this time they are bailing out real estate companies, the credit will increase but it won't translate into more commodities. In general it must depend on what the credit is being used for IMO. A pile of money to fund venture AI companies which are buying NVDA GPU is not the same as building high rises. Both will move GDP but the multiplier is different, correct?
To me your credit impulse chart looks closer to the end of an impulse than signaling an upturn, and it’s still in negative territory. China could see some demand turn up, but a renewed surge in investment seems unlikely. Most stimulus efforts have been consumption focused like the trade in program. US manufacturing is shedding jobs, and is an inventory restocking cycle really in the cards given tariff front running? Maybe when July 9 passes and there is a little more trade certainty out there. If anything this cyclical upswing seems like a 2026 phenomenon when the bulk of the reconciliation bill kicks in and hopefully all the trade related uncertainty is in the rear view.
Thinking out loud here mostly, and thanks for posting, very though provoking stuff.
Thank you for your comment.
G3 is weighted, so China+US+EU. China and US are both growing positively but negative contribution is being driven by the EU.
While still negative as you highlighted the flow of credit in Europe is lifting, and thus the strength we have seen from the trough has been optimistic.
As for manufacturing don’t disagree jobs are being shed, if we are focusing solely on USA less concerned.
The reason is capital > labor. Thus most of the growth I believe we will see in manufacturing will solely be a function of TFP (magic) and less about labor inputs.
We will be able to generate more output given the inputs into production (mostly driven by technological advancement).
So given that I think we will continue to see a surge in investment, too a point as capital investment does exhibit diminishing marginal returns to capital.
However think we are far from that in this cycle.
Re China In the last commodity boom they were building ghost cities which used alot of commodities. If this time they are bailing out real estate companies, the credit will increase but it won't translate into more commodities. In general it must depend on what the credit is being used for IMO. A pile of money to fund venture AI companies which are buying NVDA GPU is not the same as building high rises. Both will move GDP but the multiplier is different, correct?