FLASH PMIs
Global Business Activity Slows as Iran War Weighs Prices for inputs spiked due to soaring energy prices, but costs for customers also jumped as selling prices reached a more than 3½-year high
Data firm S&P Global said Tuesday that its U.S. composite purchasing managers index fell to an 11-month low of 51.4 in March, compared with 51.9 in February.
“The flash PMI survey data for March signal an unwelcome combination of slower growth and rising inflation following the outbreak of war in the Middle East,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Prices for inputs spiked due to soaring energy prices, but costs for customers also jumped as selling prices reached a more than 3½-year high, S&P said. Employment fell for the first time in over a year, while supply delays were more widely reported than any time since October 2022, the survey responses said. (…)
Input-cost inflation in the eurozone rose at its fastest rate in just over three years, while the overall level of output growth was dragged by a deterioration in new orders, S&P said.
Meanwhile, activity expanded at its slowest rate since October 2022 in India, which relies heavily on energy imports that transit through the Strait of Hormuz, the waterway that has largely been closed as a result of the conflict. Before the war began, 60% of India’s liquefied petroleum gas—used for cooking in households and restaurants—came from the Gulf, according to Capital Economics.
Input costs climbed to a near four-year high, with a range of items reported as up in price including aluminum, chemicals, electronic components, energy, food, iron ore, leather, oil, rubber and steel, S&P said.
Australia recorded the strongest fall in output since 2023, while Japanese activity also slowed, PMI data showed.
In the U.K., activity fell to a six-month low, as squeezed margins led to a further increase in job shedding, the survey showed. Unemployment has already inched higher in recent months, according to official data. (…)
Growth in the eurozone’s manufacturing industry accelerated in March—with weakness in the 21-nation currency area coming instead from the services sector—according to S&P’s PMI data. However, some of that manufacturing boost could have come as firms sought to get ahead of predicted future supply-chain shocks. (…)
Firms in the U.S. also appeared to be heeding warnings over the outlook.
“Companies are meanwhile building safety stocks amid concerns that the war may lead to more protracted supply issues and price rises while trimming head counts to reduce overheads,” said S&P’s Williamson. (…)
More from S&P Global:
USA: The slowdown was led by the service sector, where business activity grew at the weakest pace for 11 months amid a weaker gain in in new work, the latter driven by a steepening rate of loss of export sales. Slower growth and falling orders, especially in terms of exports, were commonly blamed on subdued confidence among both consumer and business customers.
A reticence to commit to additional projects and orders amid the increased geopolitical uncertainty caused by the war in the Middle East reportedly compounded existing policy-related concerns over federal spending.
There was better news from manufacturing, where output growth accelerated slightly as new orders rose at their fastest rate for five months. Export orders stabilized after eight months of decline. Panelists indicated some softening
of the tariff impact on order books, as well as instances of purchasing safety stocks, with factories and their customers keen to secure prices and ensure supply availability.
Companies are reporting a hit to demand from the additional uncertainty and cost of living impact generated by the conflict. Travel, transport and tourism related issues are compounded by financial market jitters and affordability constraints, notably including concern over the impact of higher interest rates, surging energy prices and supply chain delays.
The PMI data are indicative of GDP rising at an annualized rate of just 1.0%, with a modest 1.3% expansion signalled for the first quarter as a whole.
The survey’s price gauges meanwhile point to consumer price inflation accelerating back to around 4%, hinting at a growing risk of the US moving into an environment of stagflation.
FYI: yesterday, the Atlanta Fed’s GDPNow projection for Q1 real GDP growth was lowered from 2.3% to 2.0%.
Eurozone: The softer expansion of output was registered amid a renewed reduction in new orders, the first in eight month.
The decline was centred on services as manufacturing new orders continued to rise.
New export orders (which include intra-eurozone trade) decreased modestly again, despite a near-stabilisation of manufacturing new export business. New orders from abroad have now fallen in each of the past 49 months.
Japan: The slowdown in overall growth momentum coincided with a weaker increase in overall new business. The latest upturn in composite new work was marginal and the weakest in three months. Underlying data showed that rates of new order growth slowed notably across both the manufacturing and service sectors, with the latter recording the softest upturn in sales since last October.
Similarly, total new export business expanded at a modest rate that was the weakest seen over the current three-month period of growth. This reflected a softer rise in overseas demand for goods, as foreign demand for services increased at a slightly faster (but still marginal) pace.
Productivity Growth Revised Down; Unit Labor Costs Revised Up (Goldman Sachs)
Nonfarm productivity was revised down by 1.0pp to +1.8% in Q4 (quarter-over-quarter annualized) and the year-over-year rate was revised down by 0.3pp to +2.5%. Since 2019Q4, labor productivity has grown at an annualized rate of 2.1%.
Unit labor costs—compensation divided by output—were revised up by 1.6pp in Q4 to +4.4% (quarter-over-quarter annualized), and the year-over-year rate was revised up by 1.1pp to +2.4%.
Compensation per hour was revised up 0.6pp to +6.3% in Q4 (quarter-over-quarter annualized), and the year-on-year rate was revised up by 0.9pp to +5.0%.
Our wage tracker now stands at +3.7% annualized in Q4 and +3.7% year-over-year.
Large revisions!
The Fog of Diplomacy in Iran Trump and the regime test each other while ground troops head over.
The WSJ Editorial Board:
(…) Mr. Trump’s incentive is to calm markets with news of diplomatic progress. The regime’s incentive is to deny, deny, deny and keep markets roiled. In that sense Mr. Trump won this bout, driving a steep decline in the price of oil on Monday. This is what he does—offer relief as the trading week begins and bring the pain as it ends. The new deadline to ward off escalation is Friday, when some 2,200 Marines are due to arrive in the region.
They may be joined later by another Marine Expeditionary Unit as well as command elements and a combat brigade from the Army’s 82nd Airborne. Call it Trump-style diplomacy: One hand extends while the other visibly winds for a punch. Will this regime again challenge Mr. Trump to deliver on his threat? And was that the President’s plan all along?
The two sides remain far apart. Mr. Trump reiterates his prewar demands, including in a 15-point plan leaked to the press Tuesday: Dismantle what’s left of the nuclear program, hand over all enriched uranium, and limit the missile program. Iranian officials reiterate their prewar refusals and demand guarantees, reparations, the expulsion of U.S. forces from the region, and the payment of tolls to transit Hormuz, an international waterway. All are nonstarters, which explains the skepticism of Arab and Israeli officials.
Mr. Trump said his envoy Steve Witkoff is speaking to a “top person” in Iran, widely believed to be Mohammad-Bagher Ghalibaf. He’s the Parliament speaker, former mayor, police chief and Revolutionary Guard commander, and consummate opportunist. Some see his many political reinventions and trail of corruption allegations as signs Mr. Ghalibaf is the flexible type the U.S. has been looking for. Others see a brutal regime insider with no demonstrated desire to change Iran’s policies.
It isn’t certain that Mr. Ghalibaf can even speak for Iran’s regime. He’s one of the more senior officials left, but will the Islamic Revolutionary Guard Corps follow his lead? How much room does he have to maneuver? Part of the reason to explore talks may be to find out.
On Tuesday Mr. Trump said Iran’s regime gave the U.S. an unspecified “present,” as it had promised, related to oil and gas. This showed “we’re dealing with the right people,” he said. But he also gave them a present by easing U.S. sanctions on the export of Iranian oil.
The next step is to arrange a meeting, if Iran even wants one. The regime may feel time is on its side; the Strait of Hormuz is blocked and Mr. Trump backed down on Monday. But before you blink it will be Friday again, and with President Trump you never know what he’ll be saying then. He may not know himself.
But we trust he knows that giving in to the regime now would leave an Iranian gun to the world’s head, a proven veto on energy flows. The world—read: China and Russia—might conclude he couldn’t tolerate the political pressure at home from high oil prices.
“One bullet shot at one of our men or ships, and I’d do a number on Kharg Island,” Iran’s oil-export terminal, Mr. Trump said. “I’d go in and take it.” That was in 1988. Now he’s President, and history and the world want to know if that boast is still operative.
But:
The leaders of Saudi Arabia and the United Arab Emirates are lobbying the president to stick with the war until Iran is sufficiently weakened that it won’t pose a threat, people familiar with their positions said.
Saudi Arabia isn’t comfortable with a 15-point plan Arab mediators said the U.S. presented to Iran to resolve the conflict, which would trade full sanctions relief for Iranian concessions on every major point of disagreement with the U.S., according to a draft shared with The Wall Street Journal. (…)
Saudi Arabia and the U.A.E. fear Iran will be left with enduring influence over their energy exports and security as a result of the war. (WSJ)
And:
The Pentagon is planning to deploy a brigade combat team from the Army’s elite 82nd Airborne Division to the Middle East to support operations against Iran, the WSJ reported, citing two US officials. A written order to deploy the unit, made up of roughly 3,000 soldiers, is expected in the coming hours, the officials said.
The decision to put boots on the ground in Iran hasn’t been made yet, the officials said. (Bloomberg)
The NYT:
Taken together with some 4,500 Marines already en route to the region, the deployment of the elite Army forces brings the total number of additional ground troops dispatched to the war zone since the conflict started to nearly 7,000, and marks a new escalation in the conflict.
About 50,000 troops are assigned to the overall operation the Pentagon calls Epic Fury, from across the Middle East, Europe and the United States.
Hemingway might say that the tragic mess with boots on the ground happens suddenly, then gradually. Ask Lyndon Johnson…
- Iran refuses peace talks with Trump’s ‘backstabbing’ negotiators JD Vance being touted as preferred mediator as Tehran turns on Steve Witkoff and Jared Kushner
(…) Speaking in the Oval Office on Tuesday evening, Mr Trump said Mr Vance was among “several people” taking part in negotiations. “They’re [Witkoff and Kushner] doing it, along with Marco, JD, we have a number of people doing it,” he said. (…)
“Vance is preferred,” a Gulf source said of the Iranians. “They don’t want to work with Jared and Witkoff because they stabbed them in the back.”
A second Gulf source said the Iranians believed Mr Vance would stick to his word and that his participation is seen as the appropriate seniority for negotiations with Mohammad Bagher Ghalibaf, the parliament speaker.
Mr Vance is widely viewed as a sceptic of the US president’s “Operation Epic Fury”.
One diplomatic source said Tehran had lost trust in Washington’s delegation and was sceptical of Mr Kushner and Mr Witkoff’s seriousness about ending the conflict.
The US launched strikes on the Iranian capital killing Ali Khamenei, Iran’s supreme leader, two days after wrapping up negotiations in Geneva.
Several Gulf states had left those talks convinced a deal to avoid a full-blown conflict was possible. (…)
They’re Rich but Not Famous—and They’re Suddenly Everywhere The number of Americans worth eight or even nine figures is up markedly. It’s transforming the U.S. economy.
The number of Americans worth tens of millions and hundreds of millions of dollars has boomed in the past few decades, thanks to a rising stock market, lucrative private investments and swelling valuations for small and midsize businesses. This growing class is now a huge force in the economy, driving the demand for everything from lavish hotel rooms to private jet travel. (…)
There are about 430,000 U.S. households worth $30 million or more, according to an analysis of Federal Reserve data by Zidar. Within that, there are about 74,000 worth $100 million or more. Over the past few decades, the growth in the number of very rich households has surpassed general population growth. (…)
Because there are so many more multimillionaires, products and services that cater to this group are also booming. Hermès, Brunello Cucinelli and Ferrari all recently reported strong sales from the richest customers, while some companies that target the merely well-off are facing flagging demand. Since the start of the pandemic, demand has picked up for the most expensive homes and the highest-end travel. (…)
Sports Betting Is Everywhere, Especially on Credit Reports
Since 2018, more than thirty states have legalized mobile sports betting, leading to more than a half trillion dollars in wagers. In our recent Staff Report, we examine how legalized sports betting affects household financial health by comparing betting activity and consumer credit outcomes between states that legalized to those that have not.
We find that legalization increases spending at online sportsbooks roughly tenfold, but betting does not stop at state boundaries. Nearby areas where betting is not legal still experience roughly 15 percent the increase of counties where it is legal.
At the same time, consumer financial health suffers. Our analysis finds rising delinquencies in participating states, with spillover effects across state lines.
What is more, even though the share of people taking up sports betting after legalization is small (roughly 3 percent of the population), overall credit delinquency rises by about 0.3 percentage points. Our findings suggest that sports betting can have dramatic implications for household financial stability. (…)
The chart below shows the impact of legalization on the share of the county population with any account ninety or more days past due, with the blue line showing the direct effect and the gold line showing the spillover effect.
Sources: New York Fed Consumer Credit Panel/Equifax; authors’ calculations.
Following legalization, delinquency rose steadily in legal counties and surpassed half a percentage point three years after legalization, representing a noticeable deterioration in repayment performance from a baseline of 10.7 percent.
Spillover counties follow a similar pattern with a smaller magnitude increase in delinquencies, suggesting that, as with betting activity, the financial consequences extend across state lines.
In our Staff Report, we show that the overall increase in delinquency is driven by borrowers under the age of 40. Following legalization, the share of under-40 borrowers who are delinquent rises by 1.02 percentage points for credit cards and 0.55 percentage point for auto loans.
Our consumer credit analysis explores the overall impact of sports betting on the full population without differentiating between those that gamble and those that do not. However, the spending analysis shows that only around 3 percent of the population newly takes up sports betting after legalization.
If we instead focus on only the 3 percent of people who newly take up sports betting after legalization, the implied increase in delinquency rate conditional on take-up is 10 percentage points, roughly a doubling from the baseline rate. (…)
AI Demand Is Shielding China’s Booming Trade From War Shocks
An investment boom in artificial intelligence has kept China’s trade volumes on a path to exceed last year’s record levels, offsetting disruptions from higher oil prices in the weeks after war broke out in Iran.
Nearly 20 million containers moved through Chinese ports in the first three weeks of March, an increase of more than 6% from the same period a year ago, according to data released on Monday by the Ministry of Transport.
While moderating from the 12% gain seen in the first nine weeks of the year, the pace of increase indicates that aftershocks from the conflict in the Middle East have yet to become a serious drag on Chinese trade. (…)
Strong global demand driven by investments in data centers and power equipment is likely helping ward off external threats for Chinese companies. As evidence, economists point to a strong correlation between China’s outbound shipments and its imports from South Korea because of the deep integration between the two countries’ supply chains.
South Korea’s exports to China recorded a 69% jump in the first 20 days of March, with its overall semiconductor sales abroad surging 164%. The pickup means China’s overseas shipments probably also continued to climb after rapid growth seen in January and February. (…)
Overseas shipments soared 22% in the first two months of 2026 from a year ago, blowing past the consensus forecasts of economists. AI-related demand was already in play, as chips exports spiked 73%.
ANZ estimates that China’s AI-related exports accounted for almost 19% of the total in 2025. They mostly consisted of intermediate goods such as semiconductors, with China increasingly integrated into the global AI supply chain, ANZ analysts said in the report. (…)
Economists at the British bank estimate China accounts for more than 30% of global export value in critical AI-linked goods, far above South Korea’s share of around 6%.
“The country is a key supplier of AI manufactured components,” Barclays economists including Jian Chang said in a note. “With a 4.5%–5% growth target and no sign of large-scale fiscal or monetary stimulus, we expect exports to remain a critical growth driver.”
In Washington’s War on Data, the Economy and Public Will Lose
(…) For more than a century, Republicans and Democrats have agreed on the need for objective data to inform their debates.
(…) as New York Senator Pat Moynihan would later put it, “Everyone is entitled to their own opinions, but not their own facts.”
Those common-sense and bipartisan sentiments helped produce a statistical system that became widely recognized as the global gold standard, one that delivers immense value for American citizens for its relatively modest cost, about 0.1% of the federal budget. The categories of data collection are endless — inflation, employment, jobs, wages, trade, housing, crime, population, pollution, disease, investment, consumer spending, food production and so many others — because they are invaluable.
Government officials rely on this data as they make decisions about allocating resources to tackle problems, and as they try to determine whether policies and programs are working. If you think government is inefficient and ineffective now, wait until you see it operate without good data.
Business leaders are even more dependent on this data as they make planning and investment decisions, from retailers figuring out where to locate a store, to farmers and ranchers weighing how much of their production to hedge, to manufacturers deliberating whether to expand their plants.
Nevertheless, the administration has been undermining the integrity of the country’s statistical system by playing politics with it. When, for example, the Bureau of Labor Statistics delivered a downbeat jobs report last year, the president abruptly fired its commissioner. After introducing deep cuts in food stamps for the poor, officials canceled a survey measuring how many people were going hungry. Data on inflation, education, farm wages, police misconduct and federal employee morale have also suffered or disappeared amid staff and budget reductions. (…)
The right way to address such shortcomings is to do what successful companies do: invest in modernization. Shift from expensive phone calls and visits to online responses. Share more data across agencies and incorporate private suppliers to improve accuracy and avoid duplication. Take advantage of automation and artificial intelligence. This would entail significant upfront costs to build a new system while simultaneously maintaining the old — but, done right, it would save money in the long run.
Congress never anticipated an assault on federal data. Only four of the 13 principal statistical agencies enjoy any significant statutory protections, and even those are weak. Legislators should strengthen those protections and provide the resources and oversight needed to modernize the systems.
The Senate should also use its confirmation power to reject nominees who, because of partisan or ideological biases, seem likely to fudge numbers or weaken the integrity of data-collection efforts. It was encouraging to see senators raise concerns about the partisanship of a nominee to lead the BLS, which led the White House to drop him.
There’s another saying that I’ve long lived by in business and government: “In God we trust. Everyone else: Bring data.” But if the federal government makes it so that data can’t be trusted, God help us. (…)
Venezuela’s ‘chief torturer’ takes over the military Longtime spy chief promoted to defence minister as interim president Delcy Rodríguez consolidates power
For a decade, Gustavo González López oversaw Venezuela’s torture dungeons and spy networks. His secret police became a cudgel for strongman Nicolás Maduro. Opponents were disappeared, protesters rounded up and González was sanctioned by the US, EU and UK.
Now, in an attempt to shore up power, the US-backed interim president Delcy Rodríguez has promoted the baby-faced 65-year-old to defence minister.
The move, analysts say, encapsulates the changes to Venezuela’s government since the US whisked Maduro to a Brooklyn jail in January: the same brutal regime, with faces that are friendlier to Washington.
“He signals the continuation of the repressive dictatorship we have been living through. It’s a step in the wrong direction . . . he’s been the chief torturer in charge of political oppression,” said Ricardo Hausmann, a Venezuelan former minister in the 1990s and now a professor at Harvard. (…)
González “knew, participated and contributed to the commission of serious human rights violations and crimes, some of which amounted to crimes against humanity”, the UN wrote in 2022. (…)
“The Americans must have approved for him to get his new position.”
A White House official said: “As President Trump stated, relations between Venezuela and the United States have been extraordinary for us and for the Venezuelan people. We are dealing very well with President Delcy Rodríguez and her representatives.” (…)
Still in place is Diosdado Cabello, the much-feared interior minister who controls the country’s police and paramilitary forces, while his socialite daughter has been elevated to tourism minister.
“Rodríguez obviously doesn’t feel secure enough to strike against Cabello,” Watson said. “In fact, she appears to be cultivating his support.” (…)
Rodríguez is loathed by much of the Venezuelan public, with local pollster Meganalisis reporting her approval rating at 4.8 per cent earlier this month. (…)
Trump last weekend: “There’s automatically a regime change, but we’re dealing with some people that I find to be very reasonable, very solid. Maybe one of them will be exactly what we’re looking for. Look at Venezuela, how well that’s working out.”
