The impact of the U.S.-Iran war is starting to surface in economic data, with the S&P Global Flash Composite Purchasing Managers’ Index (PMI) falling to an 11-month low.
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Trade QQQ with leverageIn March, the Flash Composite PMI fell to 51.4 from 51.9 in February, dragged down by input prices rising at the highest pace in 10 months. This also contributed to the largest increase in average selling prices since August 2022. A PMI reading above 50 indicates economic expansion, while a reading below 50 indicates contraction.
War-Driven Costs Push Inflation, Threaten Growth
Higher prices were largely driven by surging energy costs and supply disruptions caused by the war. “Companies are reporting a hit to demand from the additional uncertainty and cost of living impact generated by the conflict,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Williamson added that the travel, transport, and tourism sectors are especially vulnerable to the war, which could lead to inflation, depressed consumer sentiment, and higher interest rates. The U.S. could also be at risk of stagflation, with the PMI data indicating annualized gross domestic product (GDP) growth of 1% and consumer inflation rising back to the 4% level.