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Chart of the Moment: Private Sector Hides Growth Concern

In the short term, U.S. growth has been supported by a combination of the post-pandemic normalization of economic activity and expansive fiscal policy, including direct government spending, excess household savings, manufacturing investment subsidies, and more. However, a significantly higher federal funds rate and tight bank lending standards are causing a material slowdown in private credit growth, as the chart shows. Going forward, weak private sector credit growth is likely to become a more meaningful drag on nominal gross domestic product (GDP) growth.

Chart 1

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