WARNING signals have been felt today after a key credit indicator mirrored the same pattern experienced ahead of the financial crisis of 2008, in a eerie sign that the global economy is heading for another downturn.
A key UBS credit impulse which monitors the changes in credit volume has tumbled by six per cent of GDP since last year.
It mirrors the same movement seen before the financial crisis 10 years ago, raising fears the global bubble could be about to burst and another credit crunch.
China and the US are the biggest drivers in the credit changes, with the measure turning negative to hit -0.53 per cent for America in March.
Both superpowers are struggling with credit saturation and in the US, Donald Trump’s tax and economy plans have put businesses plans on hold, stalling economic growth.
At the same time, China’s credit impulse has tumbled by 12 per cent of GDP.
Britain has also reached its highest level on the credit indicator, suggesting debt is now underpinning the UK economy, before falling, according to the Telegraph.
Although the impulse is higher than it was after Lehman Brothers collapsed in 2008, the signs are still worrying.
Arend Kapteyn from UBS said there is a high 0.73 correlation out of one between the credit impulse and demand in the US.
The credit figures are more worrying because the US Federal Reserve is steadily raising interest rates.
Speaking to CNBC, the portfolio manager at Janus Henderson said: “Don’t be mesmerized by the blue skies created by central bank QE and near perpetually low interest rates. All markets are increasingly at risk.”
Central banks are currently buying trillions in assets in a process known as quantative easing and as a result have kept rates at near zero or just below in an effort to regulate economies.
Full article: Global credit crunch WARNING issued on debt bubble as current trends mirror 2008 crash (Express)