Global Inventory Race Intensifies in Shadow of the Iran War

(Bloomberg) — The global rush to stockpile manufactured goods on fears of an energy-supply crunch will again overshadow business surveys in the coming week gauging the impact of a third month of war in the Middle East.

Among the purchasing manager indexes for May measuring industrial activity in key economies, all of those for which Bloomberg polls analysts are projected to show continued expansion, in many cases bolstered by front-loaded stockbuilding.

The question overshadowing the spate of numbers due from Australia to the US on Thursday will be the extent to which such a picture points to resilience, or is simply evidence of manufacturers running on fumes before the energy shock fully hits.

The indexes will also reveal how that cost impact is affecting major economies, while possibly hinting at the sort of supply logjams that production volatility caused during the pandemic.

Both of those effects could plausibly feed pipeline inflation pressures that central banks are currently watching before the next round of key monetary decisions, scheduled mainly for June.

The initial PMI results will offer another glimpse of the skewed geographical impact of the Middle East conflict, too. Numbers for April suggested euro-zone economies, including Germany, were the worst hit, while countries from the UK to Japan appeared steadier.

The surveys will allow investors to further judge the fallout of the war during an introspective week for the world economy that follows US President Donald Trump’s attempts to reset relations with Chinese leader Xi Jinping.

While concrete results of that meeting are still emerging, Group of Seven finance chiefs will take stock of the health of global growth, and the fragility of bond markets, during a two-day meeting in Paris starting on Monday that will focus on mounting imbalances and rare earths.

On Thursday, meanwhile, the European Commission releases its latest economic outlook for the region, and Germany’s closely watched Ifo business confidence index comes the following day, along with an equivalent French gauge.

What Bloomberg Economics Says:

“Euro-area GDP increased by only 0.1%. The war in Iran and the associated commodity shock had already started to dent the economy, even though the conflict only began in late February. While the expenditure breakdown isn’t available yet, country-level releases suggest that domestic demand was crimped by the rise in energy prices.”

—David Powell, senior euro-area economist. For full analysis, click here

Elsewhere, minutes of the Federal Reserve’s April meeting and a raft of Chinese economic data, along with UK news including inflation and central banker testimony, will be among the highlights.

Click here for what happened in the past week, and below is our wrap of what’s coming up in the global economy.

US and Canada

The key items on the US calendar are the Fed’s April meeting minutes, due on Wednesday, and final results Friday of the University of Michigan’s May survey of consumer sentiment. Both will likely confirm that policymakers and households are focused on inflation as gasoline prices surge.

There’s a growing contingent at the Fed looking to ditch the easing bias in the central bank’s post-meeting statements in favor of more neutral language that implies the next move could be either a cut or a hike to interest rates. They didn’t take that step in April, prompting three dissenting votes. The minutes will help shed light on how many non-voting policymakers also favored such a shift.

Michigan’s consumer sentiment gauge fell to a record low in May, according to preliminary survey results from earlier this month. Inflation expectations ticked lower after surging in March. Any changes on either front will color the outlook for consumer spending — after retail sales surprised to the upside in April — and rates, given that Fed officials are fretting over the possibility of near-term price pressures bleeding into longer-term expectations.

Rounding out the calendar is a spate of housing data — including fresh readings of homebuilder sentiment on Monday, pending home sales on Tuesday, and housing starts on Thursday — plus S&P Global’s preliminary PMI readings on Thursday.

Investors will also be on the lookout for Kevin Warsh to be officially sworn in as Fed chair, with Jerome Powell now acting in a pro tempore capacity after his term ended on Friday.

For more, read Bloomberg Economics’ full Week Ahead for the US Looking north, inflation in Canada likely jumped to 3.1% in April. The Bank of Canada expects this to mark the peak for headline inflation before it gradually recedes back toward the 2% target by early next year. Core gauges were more steady in April.

Still, the central bank warns that its outlook is highly uncertain and depends on oil prices easing to an average of $75 a barrel by mid-2027 from current levels north of $100.

Retail sales for March are expected to show solid consumer spending despite uncertainty from tariffs and the Middle East conflict, and a flash estimate for April will likely get an extra boost from higher gasoline prices.

Asia

Asia faces a slate of data from China, Japan and Australia that may offer a clearer read on how the Iran conflict and resulting energy shock are feeding through to the region’s economies.

The week begins with China’s activity indicators, including retail sales, industrial production and property data. Thailand’s first-quarter growth figures due around the same time will help round out an early snapshot of how external shocks are filtering into output.

Attention then shifts to Australia on Tuesday, where consumer confidence will reflect households’ response to the federal budget alongside still-elevated borrowing costs.

Minutes from the Reserve Bank’s May meeting — when it delivered a third straight rate hike — may reinforce a hawkish stance as inflation risks persist. Prior to the minutes on Tuesday, RBA Assistant Governor Sarah Hunter delivers a speech in Sydney. Japan’s growth data, also due, will be parsed for underlying demand strength.

Midweek, Indonesia’s central bank is expected to hold rates steady, highlighting a cautious policy approach as global uncertainties mount.

China will also set its loan prime rates, offering clues on the degree of policy support for the economy. Trade figures from Malaysia and Taiwan will add to the picture of external demand.

By Thursday, Australia’s labor market report will test the resilience of employment under tighter financial conditions, while India’s PMI readings will give a timely gauge of business activity in a high-growth economy facing rising input costs. Bank of Japan board member Junko Koeda speaks in Fukuoka, with investors watching for clues on the policy outlook.

The week wraps up with Japan’s inflation data, a key input for BOJ policy as price pressures broaden, alongside further trade and activity readings across the region.

Together, the releases will help investors assess whether Asia can withstand the latest global shock or faces a more pronounced slowdown.

For more, read Bloomberg Economics’ full Week Ahead for Asia Europe, Middle East, Africa

The UK will stay firmly in investors’ sights as the drama surrounding the leadership of Prime Minister Keir Starmer persists. The prospect of Manchester Mayor Andy Burnham succeeding him sent 10-year gilt yields soaring above 5%.

Against that backdrop, data will point to the UK’s underlying economic challenges, starting on Tuesday with jobs and wage numbers. Inflation on Wednesday is likely to have slowed but still be at 3%, the upper end of the Bank of England’s range.

Governor Andrew Bailey and colleagues will testify to lawmakers the same day, with the potential for a rate hike in June likely to feature among the topics.

The final measurement of euro-zone inflation for April is also due. On Thursday, labor costs and consumer confidence in the region will be released, followed by negotiated wages the following day.

The key focus for European Central Bank policymakers will be a meeting in Cyprus with finance ministers at the end of the week. French President Emmanuel Macron’s nominee for the Bank of France, Emmanuel Moulin, testifies in the nation’s Senate on Wednesday.

Switzerland’s first-quarter gross domestic product data on Monday are anticipated to show a growth pickup. The same day, Romanian central bank Governor Mugur Isarescu releases inflation forecasts, with faster price growth this year and next seen probable amid political instability. Sweden, meanwhile, burdened by one of Europe’s highest unemployment rates, will release jobless numbers on Thursday.

In South Africa on Wednesday, data will probably show inflation jumped to 3.9% in April as energy prices surged, marking the biggest increase in domestic fuel costs since the country adopted its inflation-targeting framework in 2020.

For more, read Bloomberg Economics’ full Week Ahead for EMEA Some monetary decisions are scheduled around the region:

On Wednesday in Ghana, officials may use the window of opportunity to continue cutting rates while inflation remains subdued, before it potentially soars due to surging energy and food prices. The central bank has lowered borrowing costs by 14 percentage points since July. Nigerian policymakers, on the other hand, are likely to stay on hold to assess the impact of the war on the inflation outlook. The same day, officials in Iceland — who already hiked rates in March — may increase borrowing costs again. On Thursday, Egypt’s central bank will likely refrain from raising rates, opting instead to wait and see the impact of the Iran conflict. Inflation unexpectedly slowed last month despite currency weakness and higher energy prices. Latin America

In Brazil on Monday, the central bank’s GDP-proxy indicator for March may yet again hold up under highly restrictive financial conditions and stretched household budgets.

In Chile, new President Jose Antonio Kast’s ambitions for 4% annual growth by end of his term have run headlong into the Iran war energy shock.

Tepid March activity data suggest first-quarter output contracted, and some analysts now see 2026 GDP growth below 2%.

In Peru, the disconnect between the volatility of the country’s politics and the reliability of its economy should continue. Analysts are looking for year-on-year growth solidly above 3% in the first quarter, building on the October-December expansion.

Paraguay’s central bank meets with the economy in no need of stimulus — growth hit 6.6% in 2025 — and inflation of 2.3% nestled within policymakers’ target range. Local analysts expect no change in rates this year.

In Argentina, March GDP-proxy data may well rebound on the back of a solid performance from manufacturing, construction and trade. Economic activity in February had posted the biggest decline since 2023.

The minutes of Banxico’s May rate meeting due Thursday may prove anticlimactic — the board in its post-decision statement all but said “we’re done,” to draw a line under the current easing cycle.

In a dose of good news for Banxico, early May inflation readings likely took a leg back down, very possibly in line with the central bank’s 4.1% second-quarter forecast. This dip comes as both global and US prints are heading up.

Final first-quarter output figures from Mexico may be marked down slightly from flash readings in late April as fallout from war in the Middle East adds to existing headwinds.

For more, read Bloomberg Economics’ full Week Ahead for Latin America –With assistance from Beril Akman, Laura Dhillon Kane, Mark Evans, Matthew Boesler, Monique Vanek, Piotr Skolimowski, Robert Jameson and Swati Pandey.

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