The United States now accounts for more than half of the world’s credit impulse, contributing approximately $800 billion in net new credit over the past year-about 2.6% of GDP. This growth is fueled primarily by artificial intelligence (AI) investments rather than traditional sectors like housing or consumer spending.
Currently, the global credit impulse measures approximately +1.3% of world GDP, with developed markets at +2.2%. The US leads, significantly ahead of other developed nations, including Japan whose own credit impulse is also rising.
This credit expansion stems mainly from increased bank lending to corporations, not bond issuance. Such lending is sensitive to economic fluctuations and regulatory changes.
UBS attributes much of this credit boom to capital expenditures in AI, particularly from hyperscalers like Amazon and Microsoft. Their massive investments in AI infrastructure influence related industries, including construction and energy, marking AI funding as the backbone of the current credit cycle.
However, this heavy reliance on AI spending introduces risk. Disruptions in AI investment could severely impact the flow of new credit, affecting economic growth and market stability.
Investors should note the implications of US financial exceptionalism driven by this concentrated credit expansion. Any slowdown in AI lending could trigger declines in equity valuations across sectors, with significant repercussions in tech and beyond.
While Japan’s increasing credit impulse offers limited diversification, a slowdown in US credit expansion could signal a broader economic deceleration.