Global business growth halts in May amid West Asia conflict; Europe hit hardest: S&P Global

Global business growth halted in May as the conflict in West Asia intensified, according to S&P Global’s Flash PMI surveys. Europe was hardest hit, with the UK and eurozone economies contracting for the first time, while growth in the US and Japan slowed significantly. The report highlighted stagflationary risks, noting that manufacturing input price inflation reached a four-year high, driven by energy costs and supply shocks. Services sectors reported the worst demand declines, though manufacturers saw temporary benefits from stockpiling. Inflation remains a critical focus, with the US consumer price index (CPI) rising to 3.8% annually in April—the highest since May 2023—and markets awaiting the Fed’s preferred core PCE inflation update. Kevin Warsh recently assumed the chairmanship of the Fed’s rate-setting committee as policymakers assess whether to maintain, adjust, or potentially raise interest rates. In the eurozone, accelerating price growth from supply disruptions pushed the economy deeper into downturn, complicating the European Central Bank’s policy stance. Meanwhile, Australia’s Reserve Bank warned of further rate hikes despite PMI data signaling growing recession risks. First-quarter GDP reports for the US, Canada, Brazil, Italy, and Singapore showed strong pre-conflict performance, though S&P Global noted these figures offer limited insight into current economic pressures. Upcoming economic indicators, including US trade data, durable goods orders, and regional Fed surveys, will shape market expectations. Europe’s central bank is monitoring consumer price indices from Germany, France, and Italy, alongside producer price data from Italy, France, and Spain. The report concluded that while first-quarter GDP figures provided some resilience, the conflict’s ongoing impact remains a dominant uncertainty for global growth.