Global Manufacturing PMI Surveys to Reveal Ukraine War Impact

 | Mar 25, 2022 06:23

h2 Global manufacturing PMI surveys to reveal Ukraine war impact

In a busy week that sees an updated US non-farm payroll report, worldwide manufacturing PMIs will reveal insights into business conditions amid the Ukraine war and China's recent lockdowns. European and US consumer confidence data will meanwhile add further insights to the plight of households as inflation rises to multi-decade highs.

Global market sentiment has remained subdued as concerns have flared over rising geopolitical uncertainty, soaring energy prices, persistent supply constraints and a hawkish Fed. As such, the slew of economic indicators - including worldwide manufacturing PMI data -arrives at a timely period in offering some concrete gauge of the severity of supply and price pressures and their impact on production. As far as the preliminary PMI surveys indicated, output conditions across the eurozone to APAC remained resilient in March, though price indicators have again been flashing red to reflect the mounting of price pressures. This backs the hawkish stance adopted by central bankers such as the Fed in the past week. However, firms have also reported a markedly darker outlook, especially in the eurozone, as the Ukraine war adds to existing headwinds, and consumer confidence is showing signs of waning amid a growing cost of living crisis.

March's US non-farm payroll report will therefore be firmly in focus, and is expected to show both a tightening labour market and rising wage pressures. Any upward surprises could be an immediate trigger of more hawkish rate hike expectations.

Preliminary March inflation data in Germany and the eurozone will also be eagerly assessed, not least by the Ukraine war on the world's major developed economies , and highlighted two opposing forces for which the interplay will be key to determining economic prospects in the coming months.

First, current output growth remained strong across the developed world — with only a marginal slowdown seen even in the eurozone, closest both geographically and economically to the war — linked primarily to the opening up of economies after the pandemic. Measured globally, COVID-19 containment measures were the least restrictive in March than at any time since the pandemic began. A further planned loosening of these restrictions should help boost growth in coming months.

However, the Ukraine war dealt a blow to business expectations about growth in the year ahead, nowhere less so that in the eurozone but also more broadly. Companies reported that the war has exacerbated existing concerns over the impact of rising prices, supply chains and reduced fiscal and monetary stimulus. Price pressures also hit new highs in March, according to the PMIs.

Monitoring this interplay between the tailwind of the fading pandemic and the various headwinds will drive the economic commentary in coming months.

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