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 Aug. 23 research note.

“The good news is that the biggest DM economies -- the U.S., 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 U.K. -- 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, U.S.-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.

Canada and the United Kingdom appear to be the most exposed, particularly given an overheated Canadian housing market and the threat of Brexit negotiations slamming income expectations and private spending, they said.

A private-sector surplus, on the other hand, is a strong predictor of growth. Tallying 17 developed economies from the mid-1980s to the present, the analysts show that when the private sector balance is 1 per cent of GDP higher, the GDP relative to potential rises about 0.4 percentage point faster in the ensuing three years -- an impact that they judge “economically large.”

A large private-sector deficit is a more reliable indicator than either debt growth or asset prices, the Goldman analysts said. This gauge is also seen as outperforming the current account balance as a crisis predictor because focusing on the private sector better measures the risk of “bouts of speculative mania.”