After the outbreak of war in the Middle East, the health of the global economy is not looking good. This is being confirmed by many surveys which have closely observed the economic conditions from America to Euro zone. According to the average estimate of economists, a decline is expected in all the Purchasing Managers Index (PMI) estimates that Bloomberg collects. According to his estimate, weakness may be seen in the service and manufacturing sectors. Three weeks after the US and Israel attacked Iran, such results would provide the first glimpse of the total economic loss so far.
The sudden spike in energy prices caused by regional shipping and production disruptions, and the resulting threat to global consumer prices, have prompted central banks to respond in a variety of ways over the past few days. Of these, UK officials postponed plans to ease their monetary policy. Their euro zone counterparts adopted a tightening policy stance and Australian policy makers decided to increase interest rates. Investors pulled back bets on the possibility of any such cuts this year after the Federal Reserve signaled that cuts in borrowing costs were still a long way off.
Chris Williamson, chief business economist of S&P Global Market Intelligence, said in a report that the most important thing at this time is inflation. He further said that central banks will also have to consider the risks of economic recession arising due to war. This means they will also keep an eye on PMI data to get clues about the impact on demand and business confidence. The list of preliminary indices to be released on Tuesday includes data from Australia, Japan and India to the Euro Zone, UK and America.
Germany, Europe’s largest economy, will also release its very important ‘Ifo Occupational Expectations Index’ on the same day. It is expected to fall to the lowest level in 13 months. Related figures for France and Italy are expected to be released later this week. Apart from this, forecasts released by Paris-based OECD will also reflect the changing economic outlook. This will be the first Joint Economic Assessment of its kind after the outbreak of war. These forecasts may offer a glimpse of more detailed economic projections to be released by the International Monetary Fund (IMF) in mid-April.
What options does America have?
According to Bloomberg economists, Trump has only a few good options at this time. Three weeks of intense bombardment by the US and Israel—including strikes that killed Iranian leaders—has not diminished Tehran’s grip on Hormuz or its resistance to US demands. More similar attacks may not yield much results. That leaves them with two options: ending the US military campaign—which would hopefully allow Iran to allow the tankers to return to Hormuz—or escalating the conflict to force Tehran into submission. Apart from this, investors may also focus on inflation data in Japan, Australia and UK, industrial profits in China, and decisions of central banks from Norway to Mexico.
US and Canada
US economic data will be coming soon, and will include S&P Global’s preliminary manufacturing and services PMI for March. On Friday, the University of Michigan will release its final Consumer Sentiment Index for the month of March. This survey will help understand whether American people have become more worried about rising prices at the gas pump now than at the beginning of the month.
Additionally, in the coming days, investors will keep an eye on comments from Fed officials. This will happen if the Central Bank has not made any changes in its rates. They are also keeping an eye on the economic impact of the Iran war. US central bankers have maintained their forecast of reducing rates only once this year.
On Tuesday, Fed Governor Michael Barr will speak on the economic outlook. Stephen Miron—who was the lone dissenter in favor of cutting rates at the March policy meeting—Vice Chair Philip Jefferson, and regional Fed presidents Mary Daly of San Francisco and Anna Paulson of Philadelphia—are also scheduled to speak.
Caroline Rogers, Senior Deputy Governor of the Bank of Canada, will speak in Brandon, Manitoba, on the factors shaping Canada’s economic outlook and financial system, including this year’s renewal of the monetary policy framework. Meanwhile, preliminary wholesale and manufacturing data will provide an early idea of how these two sectors affected by tariffs are performing in the first quarter.
Asia
- There will be special attention on inflation figures in Asia. Data coming on Tuesday is expected to show that the pace of increase in consumer prices in Japan has slowed in February. The reason for this is that energy costs reduced due to utility subsidies and the increase in prices of food items also reduced compared to last year.
- The main measure of inflation, which excludes fresh food items, fell below the Bank of Japan’s 2% inflation target for the first time in nearly four years. However, given the surge in oil prices following the escalation of the Iran war in March, this situation may not last long.
- The following day, Australia’s CPI (Consumer Price Index) data is expected to show that the ‘trimmed mean’ measure remained at an elevated level in February. These figures will justify continued interest rate hikes by the Reserve Bank and could strengthen the chances of another increase in borrowing costs in May.
- Singapore will also release CPI figures for February in the coming week. Countries that have released PMI (Purchasing Managers Index) data for March include Australia, Japan and India. It is expected that these three countries will report that their manufacturing indicators still remain in the growth zone.
- China will release year-on-year figures of industrial profits till February on Friday. Last year, China’s annual industrial profit increased by 0.6%, which was the first such increase since 2021.
- Trade data is due from the Philippines, Thailand, South Korea and Hong Kong, and New Zealand will conclude the week with a March consumer confidence report.
- On the policy front, the Central Bank of Sri Lanka is expected to keep its interest rate at 7.75% on Wednesday. If this happens, the process of keeping interest rates stable for five consecutive meetings will continue and will further emphasize that the cycle of reducing inflation has now reached its final stage, because officials are keeping an eye on a possible rise in inflation.
- Elsewhere, Reserve Bank of New Zealand Governor Anna Breman will give his views on the impact of the ongoing conflict in the Middle East on inflation in a speech on Tuesday. Economists estimate that price rises will exceed the upper end of the bank’s 1 per cent to 3 per cent target range for most of this year.
Europe, Middle East, Africa
- The impact of a big week in terms of monetary decisions will be felt across Europe. During this time, statements of many policy makers are going to come and some important data will also be released. Economists predict that UK inflation data to be released on Wednesday will show that the pace of annual price rise has slowed to 3 percent in February. This report will be especially focused on when Britain’s 10-year gilt yield has reached its highest level since 2008.
- This change in the market came when the Bank of England, moving away from its stance of cutting interest rates, announced that it was “ready to act”. Deputy Governor Sarah Breeden, Chief Economist Hugh Pill, and rate setters Megan Green and Alan Taylor will all speak during this period.
- Talking about the European Central Bank (ECB), if necessary, it can increase interest rates with its next decision on April 30. Meanwhile, Chief Economist Philip Lane will address on Monday. On Wednesday, ECB President Christine Lagarde will address the annual “ECB and its Supervisors” conference in Frankfurt.
- Swiss National Bank President Martin Schlegel will speak in Zurich on Tuesday. This address will come as the Central Bank has reiterated that due to the war its readiness to intervene has increased to stop safe haven flows towards the franc.
- The very next day, Sweden’s Riksbank will release minutes of its decision, in which policymakers kept borrowing costs stable.
- On Tuesday, Hungary’s Central Bank will set rates for the last time before the country’s decisive elections. There is a possibility that due to the energy crisis, the scope for further reduction in rates will be reduced.
- On Thursday, Norwegian officials are set to keep borrowing costs stable. This decision is being taken on the basis of data which shows that there has been no significant relief in price pressure and the economy is expected to remain strong. Governor Ida Volden Bache is expected to signal even less relief than the current estimate (a quarter-point cut per year).
- On the same day, the Central Bank of South Africa is expected to keep its rates steady at 6.75 percent. The bank is assessing the impact of inflation caused by the war, which has weakened the rand and sent oil prices soaring.
Latin America
Brazil’s Central Bank released details of its March 18 decision on Tuesday. In this decision, the bank had carefully reduced the interest rates by a quarter point from the highest level of 15 percent in almost two decades.
Given the great uncertainty created by the ongoing war in the Middle East, BCB chief Gabriel Gallipolo and his colleagues gave little indication about the future in a statement issued after the decision, and are unlikely to take any new steps on the matter. Latin America’s No. 1 economy will also release the BCB’s monetary policy report, mid-month inflation figures, and February unemployment figures.
The ongoing war in Iran will also be an important issue during the meetings of the central banks of Chile and Mexico. For Banco Central de Chile, the conflict has almost entirely postponed a decision on a possible quarter-point cut in interest rates from 4.5 percent; The reason for this is that this Andes country imports almost the entire part of its fuel.
Argentina’s GDP-related figures for January are likely to be in line with the overall slowdown seen in South America’s No. 2 economy through the first quarter of 2025. Many analysts view December’s strong production figures as a headfake rather than a real trend, and are cutting their growth projections for 2026 accordingly.