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The US will keep growing for several quarters, but 2025 will see a hard landing, Apollo’s Torsten Slok told Bloomberg TV.
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Debt is fueling the growth, and both consumers and corporations are already feeling distress.
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These problems will come to the forefront when unemployment starts to meaningfully rise.
The US economy will stay afloat through the next few quarters, but growth drivers could turn into headwinds as soon as next year, Torsten Slok said.
According to the Apollo chief economist, that’s because current strength stems from high debt loads, both among US consumers and the corporate world. Eventually, those trends will start to falter, triggering a hard landing in 2025.
Slok pointed out that delinquencies are rising on credit cards and auto loans, despite an economy with low unemployment. Meanwhile, economic momentum hasn’t done away with highly-levered firms, which extend across industries.
“That tells you once people do begin to lose their jobs, once the economy does begin to slow down, you already have a lot of distress,” he told Bloomberg TV. “Imagine what the process would look like if you finally get the unemployment to move higher.”
Slok also pointed to commercial real estate, a sector that’s been the source of widespread fears amid higher interest rates. These hikes have caused borrowing costs to rocket for the industry, and many fear a tsunami of debt defaults if rates don’t come down soon.
Office properties have been a particular sore spot,…
