Mounting consumer stress in the US and China's tepid recovery threaten to dim the global economic outlook, raising potential downside risks for financial markets. Last week's US jobs report showed that summer hiring was weaker than previously thought, as the Labor Department issued downward revisions for June and July that amounted to a net decline of 110,000 jobs from prior estimates. Separate surveys revealed that US consumer confidence weakened more than expected in August, the personal savings rate in July fell to its lowest mark since November 2022, and credit-card delinquency rates returned to pre-pandemic levels in the second quarter. Taken together, the latest data indicate that rate hikes and tighter borrowing conditions are beginning to drag on consumers and businesses. Meanwhile, millions of Americans may come under further budget stress in the months ahead—just as the crucial holiday shopping season kicks off—with payments on an estimated $1.1 trillion in federal student loans set to resume in October. A potential strike by US auto workers adds an extra dose of uncertainty to the near-term outlook.

Slower growth in China also looms as a challenge for its key trading partners and the global economy. Patrick McDonough, Portfolio Manager at PGIM Quantitative Solutions, addresses the state of the Chinese economy in a new video, explaining the varying impact that a downturn in the world's second-largest economy may have across regions and sectors.