How Big an Issue is Macro Economic Uncertainty?

Challenging is the way some might characterize 2022 data center industry trends, if looking at issues such as sustainability or security, mergers and acquisitions or capacity issues. Growing investor demand also has boosted asset prices, with predictable impact on transaction markets. 

Macro economic conditions are another mattrer. If economic activity contracts, dafa center services demand shouild see some negative pressure. The issue is that nobody seems to have a clear view of where we are or where we are headed, in that regard.

So far, edge computing has been arguably less controversial, as it drives a minimal amount of revenue for data center providers at the moment. Sure, it is coming, but the revenue impact remains slight, so far.

Others will point to steady demand growth as positives, even if 2022 saw headwinds in terms of growth rates. 

source: Statista   

But economic conditions probably are weighing on the business, in addition to supply chain issues, war, inflation and economic recession fears. In short, the macro environment is volatile. 

source: Cushman Wakefield 

How much an issue macro economic issues might play is a bit unclear. Underlying demand growth might be the key trend, but economic slowdowns will affect spending by enterprises on information technology. And technology suppliers seem to be preparing for more-challenging conditions in 2023. 

Hyperscale app providers are reducing headcount, which provides some evidence of their expectations about their own fortunes in the near term. But uncertainty might be higher than usual as monetary officials battle high inflation with higher interest rates intended to slow the economy down, raise unemployment, reduce asset prices and wage demands under conditions that seem in some ways stubbornly resistant to those policy moves. 

So to the extent that macro economic conditions matter for the data center business and other industries in technology and communications, asset trends before and after any typical recession provide something of a Rorschach test: what do you see in the economic picture? 

Perhaps more to the point, where in the economic cycle are we? In recession or pre-recession? And how deep might any recession be? How likely is a “soft landing” that breaks the inflation cycle without plunging economies into negative growth?

source: Bloomberg, Yahoo 

 Uncertainty ls the watchword in financial markets at the moment and volatility is the result. How much that can, or will, affect data center markets also is a bit unclear.