Iran War Stagflation Risks Tested by Global PMI Data

Seven weeks of Middle East conflict are expected to reveal their economic impact through a second round of purchasing manager indexes and inflation data from multiple countries in the week of April 20–24, 2024. The International Monetary Fund warned of potential near-recession risks, with IMF Managing Director Kristalina Georgieva stating that “the impact is already baked in” even if the conflict ends. Global policymakers remain cautious about policy responses amid high uncertainty.

Global Stagflation Concerns and Survey Data

The purchasing manager indexes (PMI) from April will be closely watched for signs of stagflation—the combination of rising prices and stalling growth that characterized the 1970s. Chris Williamson, chief business economist at PMI-compiler S&P Global, cited stagflation risks highlighted by the overall global measure in March.

According to Bloomberg forecasts, PMI indexes from Germany, France, the eurozone, and the UK are anticipated to show broad deterioration in April, while American indicators are seen little changed. The initial April readings will be published on April 23 from Australia, the US, and other economies.

ECB chief economist Philip Lane acknowledged the challenge of interpreting survey data amid uncertainty, stating: “We will have a rich set of survey data. Of course, the people who are answering those surveys are looking at the same world we are looking at.” The European Central Bank will set interest rates later in April after reviewing PMI data, French business confidence on April 23, and Germany’s Ifo business climate gauge on April 24. The U.S. Federal Reserve will review the University of Michigan’s sentiment index at the end of the week.

IMF Managing Director Georgieva warned that even comprehensive analysis has limits: “We all need to learn to operate in an environment of high and permanent uncertainty.”

Asia’s Inflation and Rate Decision Calendar

Inflation risks tied to the global energy shock will dominate Asia’s economic calendar. China’s loan prime rate decision on April 20 is expected to deliver no change, as policymakers balance support for growth against currency pressures.

Trade data from New Zealand, Japan, Thailand, and Malaysia will provide early readings on external demand. New Zealand’s first-quarter inflation print on April 21 is a key input for the central bank’s policy outlook.

Indonesia’s rate decision on April 22 is expected to see policymakers hold steady as they weigh currency stability against rising imported inflation.

April 23 brings the week’s heaviest data flow in Asia. PMI readings from Australia, Japan, and India will provide timely reads on business conditions, while inflation data from Singapore, Hong Kong, and Japan will offer early evidence of pass-through from higher energy prices. The Philippines central bank is expected to raise its benchmark rate by 25 basis points to 4.5 percent, underscoring a tightening bias in parts of the region. South Korea’s consumer confidence reading will be closely watched for signs of strain on households. Japan’s department store sales and leading indicators will gauge the resilience of domestic demand.