At the level of companies, the signs of an impending economic slowdown are increasing. Sectors at the start of the production process, such as chemicals, construction, semiconductors and parts of industry, in particular, are reporting declining incoming orders.
The picture is different for companies that are close to consumers. Demand for consumer goods and services continues to develop dynamically. The sharp rise in financing costs over the last 15 months – in the USA, for example, 30-year mortgage interest rates have risen from three percent to seven – can evidently be offset for longer than anticipated with favourable labour market conditions and fiscal support. Inflation, which has currently fallen sharply, is also brightening the mood.
Nevertheless, we do not believe in a soft landing. After all the stimuli from the pandemic, climate packages and the energy crisis, monetary policy decisions are simply taking longer than expected to have an effect.
The recent interest rate hikes by the US and European central banks should still exert their slowing effect in view of the historically high levels.