Inflation and high interest rates hamper global economic growth

A survey by S&P Global showed that business activity at service businesses in the US, eurozone, UK and Australia all grew slower in May due to lower prices. Climb the ladder.

High inflation, geopolitical tensions and rising interest rates are lowering the outlook for economic development. (Artwork – Photo: The New York Times)

Factories in major economies face supply chain disruptions linked to the rise of COVID-19 and conflict in Ukraine, as well as higher fuel costs and rising wages. Some businesses are planning to reduce growth or shrink production.

A survey of purchasing managers at businesses in some of the world’s largest and richest economies found some activity continued to improve as a result of the easing of restrictions in the services sector as Western countries have learned to live with COVID-19, along with the tourism sector recovering strongly.

According to a report by the US Census Bureau on May 24 on cnbc.com, the real estate market, especially the sales of newly built homes in the US in April 2022, dropped sharply, to only 16.6 % of sales in March, much lower than expected and 26.9% year-on-year.

This is the slowest sales rate since April 2020, when the COVID-19 outbreak began. Consumers are being hit by rising interest rates and high inflation over the past four decades, making it even harder for them to buy a home when prices are higher.

The median price of a new home sold in April was $450,600, up nearly 20% from 2021.

George Ratiu, senior economist at Realtor.com, said the market for new homes is mirroring broader property trends, as rising inflation is taking up a larger share of people’s wages. The US and rising borrowing costs are constraining the budget of homebuyers.

Currently, the demand to buy houses is falling sharply, not because of too much construction. The number of homes has begun to decline over the past few months. Slower sales led to a sharp increase in inventory of newly built homes for a 9-month supply.

According to builders, cancellation rates have also increased, and construction-watching analysts have begun reporting on it.

High inflation, geopolitical tensions and rising interest rates are lowering the outlook for economic development. Last week, the United Nations lowered its forecast for global economic growth in 2022 from 4% to 3.1% and lowered its forecast for US economic growth from 3.5% to 2.6%.

PV