Global PMI Recap: Inflation Pressures and Labor Market Weakness Cloud Growth Outlook

The preliminary PMIs provide an early snapshot of global economic conditions, highlighting continued services-led expansion but persistent struggles in manufacturing. Inflationary pressures are rising, particularly in Europe and the UK, where higher wages and input costs are pushing prices up. Employment trends remain concerning, with job losses accelerating in manufacturing across the Eurozone and UK, while services hiring remains more resilient. With global demand still weak and inflationary pressures intensifying, central banks face a challenging policy landscape in balancing growth and price stability. The U.S. PMI data at 9:45 AM ET will be critical in shaping expectations for Federal Reserve policy and broader market sentiment.

Germany

Germany’s Composite PMI rose to 51.0, led by services at 52.2, while manufacturing improved to 46.1, its highest in two years. Job losses in manufacturing persisted, but inflation eased slightly as manufacturers continued discounting to boost demand. Sentiment softened, with tariffs and geopolitical risks weighing on business confidence.

Eurozone

The Eurozone Composite PMI held at 50.2, with services slowing to 50.7 while manufacturing improved to 47.3. Job losses in manufacturing hit a four-year high, and cost pressures surged to a near two-year peak, driven by wage growth in services. Business confidence declined, reflecting concerns over slowing demand and rising geopolitical risks.

United Kingdom

The UK Composite PMI slipped to 50.5, with services rising to 51.1, while manufacturing fell sharply to 46.4. New business and export orders dropped, and job losses accelerated at the fastest pace since November 2020. Inflation remains a key concern, with firms raising prices at the fastest rate in two years due to higher wages and input costs.

Japan

Japan’s Composite PMI rose to 51.6, led by services at 53.1, while manufacturing remained in contraction at 48.6. Employment growth slowed, particularly in manufacturing, and business confidence weakened to a three-year low amid concerns over inflation and global demand.

Australia

Australia’s Composite PMI climbed to 51.2, a six-month high, with services rising to 51.4 while manufacturing remained sluggish at 50.6. New orders grew, but export demand weakened. Employment trends were mixed, and rising material, energy, and wage costs drove inflation higher for the third straight month.

India

India’s Composite PMI surged to 60.6, led by services at 61.1, while manufacturing slipped slightly to 57.1. Employment hit a record high, and export orders rose at a seven-month peak. Input cost inflation eased, but firms raised prices at the fastest rate in three months, reflecting higher labor and material costs.

Conclusion: A Mixed Picture for Global Growth and Monetary Policy

The latest PMI data highlight persistent inflationary pressures, particularly in Europe and the UK, where rising wages are fueling price increases. Manufacturing remains fragile, with Germany, Japan, and the UK struggling, while India and Australia show stronger momentum. Job losses in the Eurozone and UK are a growing concern, contrasting with continued hiring in India and services-driven economies. With inflation proving sticky, central banks may hesitate to cut rates too soon, making the upcoming U.S. PMI critical in shaping monetary policy expectations.