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Global real estate stifled by rising interest rates, leads to economic slowdown

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Detailed sectoral PMI data compiled by S&P Global, derived from information provided by panels of more than 30,000 companies in 45 countries, reveals falling demand in nine of the 26 detailed sectors covered by the surveys, with far the strongest contraction recorded for real estate in a context of tightening financial conditions and rising costs of living.

New global orders

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According to data from the S&P Global PMI survey, new orders placed for goods and services rose globally in June at the slowest pace in nearly two years, recording only a modest expansion in demand. during the month. Data analysis revealed that the slowdown was led by a sharp drop in orders for financial services, and real estate business in particular.

New orders for financial services actually fell for a third straight month in June, with the latest drop being the steepest since May 2020.

The financial services real estate segment meanwhile saw new orders fall for a fourth straight month in June, with the rate of reduction also the highest since May 2020.

To underscore the severity of the latest decline in demand for financial services and real estate in particular, with the exception of the pandemic shutdowns in early 2020, these latest declines are far larger than any declines seen since data Comparable sector-level PMIs were available at the end of 2009.

Banking firms also saw new orders tumble, falling for the second month in a row, albeit at a reduced rate of contraction, also marking the sector’s worst performance since the first pandemic business shutdowns.

Global PMI

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The outlook for the future is also particularly bleak for financial services and especially for real estate. The PMI Future Expectations Index, which measures expected business activity for the coming year, was the lowest seen across all industries and sub-sectors for financial services and real estate respectively.

New orders for financial services fell particularly in the United States, falling for the second month in a row and falling at a rate surpassed since 2009 by the only decline recorded in April 2020.

In Europe, new orders in the financial services sector fell for the first time since March 2021, with new business inflows into real estate falling for a second month and at an accelerating pace.

In Asia, by contrast, financial services firms reported an increase in new orders for the first time since January, largely reflecting a reopening of the economy in mainland China, although new property work fell for a sixth. consecutive month, although with the rate of decline in easing.

While the divergence in demand for financial services between Asia and the West partly reflects the recent reopening of parts of the Chinese economy since the easing of the Omicron wave, the slowdown in demand in the United States and in Europe also reflects rising interest rates and tightening conditions more generally in those economies, according to anecdotal evidence provided by contributors to the PMI survey.

Application for financial services

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Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.