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The ongoing slowdown in China is not just a cyclical downswing driven by slowing growth in the US and Europe.
Slower growth in China is also the result of the deflating housing bubble and deteriorating demographics.
Our outlook for China is available here, key charts inserted below.
Source: Bloomberg, Apollo Chief Economist 
Source: Haver, Apollo Chief Economist 
Source: Bloomberg, Apollo Chief Economist 
Source: UN, Haver, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Almost half of US households have used Buy Now Pay Later (BNPL), see chart below.
Source: LendingTree, Apollo Chief Economist. Survey of 1,000+ consumers conducted in March 2021, March 2022, and March 2023. See important disclaimers at the bottom of the page.
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One source of upward pressure on US rates is the $7.6 trillion in US government bonds that will mature over the coming 12 months, see chart below.
Source: Treasury, BEA, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The share of Chinese exports to the US, Europe, and Japan has declined steadily over the past 20 years, see the first chart below.
Similarly, China is today the top export destination for eight of the G20 countries, up from zero in 2000, see maps below.
Source: General Administration of Customs (China), Haver Analytics, Apollo Chief Economist 
Source: IMF DOT, Haver Analytics, Apollo Chief Economist 
Source: IMF DOT, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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We have updated our estimates of how much excess savings households have left using the Fed’s methodology, and the conclusion is that consumers are almost out of pandemic savings, see chart below.
Source: BEA, Haver Analytics, Apollo Chief Economist.
Note: Excess savings are calculated as the accumulated difference between actual personal savings and the trend implied by data for the 48 months leading up to the first month of each recession, as defined by the NBER.See important disclaimers at the bottom of the page.
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IG and HY issuance are higher in September, and this is a technical headwind to credit markets over the coming weeks, see charts below.
Source: Pitchbook LCD, Apollo Chief Economist 
Source: Pitchbook LCD, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Markets think the inflation problem has been solved. But that is the wrong conclusion.
The chart below shows that supercore inflation, which is the Fed’s preferred measure of inflation because it excludes housing, is sticky at 4.5% and not showing any signs of moving down to the Fed’s 2% inflation target. In fact, supercore inflation increased in July because of strong inflation in financial services, transportation, food services, amusement parks, and sports.
The bottom line is that inflation is still a problem, and equity markets, credit markets, and rates markets are underestimating how much additional slowing is still needed in the service sector to get inflation under control.
Source: BEA, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Since the Fed started raising rates in March 2022, deposits in the banking sector have declined by $862 billion, see the first chart.
Over the same period, almost the same amount, $896 billion, has gone into money market accounts, see the second chart.
Our banking sector chart book is available here. It shows that credit growth continues to slow, and bank lending conditions continue to tighten, see the third, fourth, and fifth charts.
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist. Note: March data as of 10th May 2023. Peak is defined as the month before monthly outflows turn negative. 
Source: FRB, ICI, Bloomberg, Apollo Chief Economist 
Source: FRB, Bloomberg, Apollo Chief Economist 
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist 
Source: FRBNY, Haver Analytics, Apollo Chief Economist. Note: Harder equals much harder + somewhat harder. See important disclaimers at the bottom of the page.
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Since the ECB started raising rates in July 2022, corporate bankruptcies have trended higher, driven by transportation and storage; accommodation and food services; and education, health, and social activities—see chart below.
With the ECB keeping rates high well into 2024, we should expect these trends to continue.
Source: ECB, Apollo Chief Economist See important disclaimers at the bottom of the page.
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When interest rates increase, the household sector has to pay more for debt.
But when interest rates go up, households also receive higher cash flow on fixed-income assets.
Dividing households’ interest payments with households’ interest income shows that debt servicing costs as a share of interest income are at the highest level since 1959, see chart below.
In other words, both debt servicing costs and interest payments have increased as the Fed has raised interest rates. But debt servicing costs have just increased more.
Source: BEA, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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