This week, financial markets will focus on upcoming flash manufacturing and services PMIs, as well as inflation data from major economies. These figures are crucial for investors assessing the global economic outlook amid escalating trade tensions.
ADVERTISEMENTLast week, global stock markets came under pressure as major central banks expressed concerns over growth and inflation, driven by Trump’s tariffs. Investors will now turn their attention to manufacturing and services Purchasing Managers’ Indexes (PMIs) for insights into the economic trajectory. Additionally, the EU summit on Ukraine aid and the bloc’s role in peace negotiations will be a key event for European equities.
Inflation data from Australia, the UK, Japan, and several European economies will also be closely watched as the global trade war intensifies.
Flash PMIs from the EU, UK, and US
A series of flash manufacturing and services PMIs for March from major economies will be released by S&P Global on Monday. These indices provide key insights into economic health by measuring activity across sectors based on new orders, employment, and business confidence. A reading above 50 signals expansion, while a figure below 50 suggests contraction.
Since Russia’s invasion of Ukraine in 2022, surging energy prices have fuelled inflation and led to rapidly rising interest rates, significantly slowing global manufacturing activity.
The EU has been particularly impacted by macroeconomic headwinds, with its manufacturing sector in decline since mid-2022.
In February, the eurozone’s manufacturing PMI improved to 47.6 from 46.6 in January, marking the mildest contraction since early 2023. Germany, France, Italy, and Austria all recorded a slower pace of decline, while business confidence rose to a three-year high, likely due to falling interest rates and China’s economic recovery.
However, Trump’s recently imposed 25% tariffs on steel and aluminium imports could place fresh pressure on the sector. This week, the focus will be on data from Germany and France, where February’s manufacturing PMIs were revised higher to 46.5 and 45.8, respectively, though both remained in deep contraction. The data is expected to show further improvement in March.
Conversely, the eurozone’s services PMI has been expanding for three consecutive months, though growth slowed in February as new business fell. The index stood at 50.6 last month, down from 51.3 in January.
In France, the services PMI contracted for a sixth straight month, with output constrained by weak demand, shrinking customer bases, and broader economic fragility.
In contrast, Germany’s services sector expanded for a third consecutive month. Consensus forecasts suggest German services PMI will rise further to 52.3 in March.
In the UK, February’s manufacturing PMI remained in contraction at 46.9 for the fifth consecutive month, with March’s data expected at 47.3. Meanwhile, services PMI edged up to 51, staying below 52 for the past four months as firms curtailed spending and investment due to economic uncertainty. The services index is expected to remain in modest expansion.
In the US, manufacturing PMI climbed to 52.7 in February, reflecting accelerated growth partly due to “advanced purchases in anticipation of potential price increases and supply disruptions linked to expected tariff impositions.” However, services PMI fell sharply to 51 from 52.9 in January, weighed down by economic uncertainty. Market forecasts place March’s manufacturing and services PMIs at 51.9 and 51.2, respectively.
Inflation data from the US, UK, and Europe
Key inflation data this week includes the US Personal Consumption Expenditures (PCE) index, the UK and Australia’s monthly Consumer Price Index (CPI), Japan’s Tokyo core CPI, and preliminary CPI figures from France and Spain.
The US PCE, the Federal Reserve’s preferred inflation gauge, is critical for monetary policy decisions. In January, core PCE slowed to 2.6% year-on-year, down from 2.9% in December.
However, the Fed raised its median core PCE forecast for 2025 to 2.8% from 2.5%, citing “increased uncertainty around the economic outlook.” Despite this, Fed Chair Powell described tariff-driven inflation as “transitory” and downplayed recession risks. A higher-than-expected reading could sustain pressure on US stock markets and fuel further sell-offs.
ADVERTISEMENTIn the UK, inflation accelerated to 3% in January, the highest since March 2024, prompting the Bank of England to maintain its policy rate at 4.5% last week. Annual inflation is expected to cool slightly to 2.9% in February. Investors will also scrutinise the UK government’s budget plan, set to be released on Wednesday.
Spain’s annual inflation is projected to ease to 2.7% in March from 3% in February—the highest level since June. By contrast, France’s inflation was confirmed at 0.8% in February, the lowest in four years, with expectations of a slight increase this month.