Canada, UK have this gauge to fear amid turmoil: Goldman

Bloomberg

One under-appreciated indicator is flashing red for some developed markets, Goldman Sachs analysts say.
The private-sector financial balance — an economy’s total income minus the spending of all households and businesses — has proven more powerful in predicting crises than
the current-account balance, Goldman analysts led by Jan Hatzius, the bank’s global head of economics, wrote in an August 23 research note.
“The good news is that the biggest DM economies — the US, the Euro area, and Japan — are all running healthy private sector surpluses,” they wrote.
“The not-so-good news is
that some of the smaller DM economies — especially Canada and the UK — are running sizable deficits and appear vulnerable to higher interest rates and weaker asset markets.”
The finding is another warning sign for the global economy at a time of sporadic turbulence arising from monetary tightening, US-China trade battles, and stress in some emerging markets.
A private-sector deficit means households and firms can’t finance their current spending with current income and rely on net borrowing or asset sales, the Goldman analysts wrote.
That makes growth and financial stability more vulnerable in an environment of rising rates or market declines, they said.