Chart 2: China PMIs bouncing back but still in contraction
Source: Fidelity International, Bloomberg, June 2022.
Global consumers under pressure
How long can consumer spending stay strong in the face of rising inflation and falling real wages? US consumers have been relatively resilient this year. Consumer balance sheets are strong and retail sales has held up well. But cracks are starting to appear - the collapsing confidence we have been picking up in our proprietary activity trackers is starting to show up in hard data. Real wage growth has fallen in major economies, and a cost-of-living crisis is spreading.
The housing market will become the primary agent via which tightening financial conditions will cool end demand in the US. House sales are already beginning to wobble, while mortgage rates have risen sharply.
Chart 3: US consumers hurt as housing affordability plumets
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This content comes from Fidelity Multi Asset’s Global Asset Allocation July report. Fidelity’s Global Macro & SAA team contributes to Fidelity Solutions & Multi Asset’s tactical asset allocation process by providing key macro inputs, working alongside the investment team to understand and respond to the macroeconomic drivers of markets.
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