PMIs Flash Warning: Global Growth Cools, Inflation Splinters, and Trade Falters Under Tariff Strain

The September flash PMI surveys provide a nuanced snapshot of the global economy: growth is still visible, but it is increasingly uneven; inflation is showing tentative signs of easing, but not uniformly; and trade remains a consistent weak spot, weighed down by tariffs and fragile external demand. Together, the reports from India, the UK, Germany, and the Eurozone suggest a world economy that is expanding in pockets but losing breadth, with risks concentrated in manufacturing and exports.

Starting with growth, India continues to lead the pack. Its Composite PMI at 61.9 points to a private sector still running hot, though momentum has cooled slightly from August’s highs. Both manufacturing and services remain comfortably in expansion territory, supported by resilient domestic demand and lower GST rates that have buoyed consumption. By contrast, the Eurozone and Germany are growing, but modestly. The Eurozone Composite PMI edged up to 51.2, its best in sixteen months, though new orders were flat, highlighting the fragility of the rebound. Germany, the bloc’s largest economy, saw its strongest performance in over a year, powered by services, while manufacturing output, though still positive, slowed. In the UK , the picture is weaker. The Composite PMI slipped to 51.0, a four-month low, with growth barely held together by services as manufacturing contracted sharply. In sum, services are keeping the global growth engine alive, but momentum is patchy and concentrated in fewer regions.

Inflation signals are similarly uneven. India provides a case study in divergence: while overall price pressures eased, manufacturers reported their fastest factory-gate price increases in over a decade, driven by rising wages and commodity costs, even as service providers raised charges at a slower pace. Europe, by contrast, is seeing inflation soften. In the Eurozone, input cost inflation cooled and output charges eased to their weakest since May, with manufacturers cutting prices and services still raising them but more slowly. Germany was the exception, with inflationary pressures re-accelerating in services, where rising wages and energy costs pushed input prices higher. The UK sits somewhere in between: services continue to pass on higher wages, energy, and food costs, but manufacturers are increasingly constrained, with factory-gate price inflation falling to multi-year lows. The overarching theme is that global inflation is not accelerating and in many regions is cooling, but sticky service costs, particularly wages, remain a concern for central banks.

Trade is the clearest area of weakness. In India, export growth slowed to a six-month low, weighed down by U.S. tariffs that hit sales of goods after a period of frontloaded shipments. Manufacturing exports showed some resilience, but services exports weakened sharply. In Europe, the drag from external markets is more entrenched. The Eurozone recorded its 31st straight month of declining export orders, with September’s drop the steepest in six months, while Germany’s goods producers reported a second consecutive month of export declines. The UK fared no better: export orders fell at their fastest pace since April, particularly to the U.S. and Europe, underscoring global demand fragility. The common thread across all four regions is that international trade is not providing the growth cushion it once did, and in some cases, tariffs are directly weighing on momentum. Protectionism and geopolitical frictions are amplifying what would otherwise be a cyclical slowdown in external demand.

Looking across the themes, one key story is the divergence between domestic and external demand. India’s economy remains shielded by robust local consumption and tax cuts, while Europe and the UK lack that cushion. Services are consistently outperforming manufacturing, but even within services, growth momentum is cooling in places like the UK. Another story is employment: Germany and the UK continue to shed jobs, while Eurozone hiring stalled, suggesting that labor market support for growth is waning. India is the outlier again, with modest job creation continuing, though at a slower pace.

The major concerns emerging from these surveys are twofold: first, that growth is becoming overly reliant on services while manufacturing and exports falter; and second, that trade weakness, compounded by tariffs, could feed back into confidence and investment. Inflation is less of an immediate threat than earlier in the year, with most surveys pointing to cooling cost pressures, but wage-driven service inflation could keep central banks cautious. The Bank of England may lean more dovish given the UK’s fragility, while the ECB will welcome easing pressures but remain mindful of Germany’s service-led price growth. For India, the divergence between manufacturing and services inflation will be closely watched.

In summary, the September PMI data show a global economy still expanding but increasingly unbalanced. India is a bright spot, Germany shows surprising resilience in services, and the Eurozone is holding on to modest growth, but the UK looks fragile and trade is a clear global drag. Inflation is cooling in many areas, though not uniformly, and services cost pressures remain sticky. The broader takeaway is that the global economy is not at risk of immediate contraction, but its foundations are uneven. Growth is cooling, trade is weakening, and inflation is easing but not conquered. The common thought across surveys is that tariffs and protectionism are adding strain at a time when global demand is already soft—leaving policymakers to juggle weak growth, lingering inflation, and fragile trade all at once.