ABN AMRO's Senior Economist Arjen van Dijkhuizen reports that the global manufacturing Purchasing Managers' Index (PMI) declined from 51.8 in February to 51.3 in March, marking a reversal from a 44-month high [1]. This drop is attributed largely to the escalation of the conflict between the US/Israel and Iran, which began on February 28 [1]. Emerging markets, particularly China and India, were the primary contributors to the deterioration in PMI, while developed markets showed relative resilience, evidenced by longer delivery times [1].
The Iran conflict has revived supply bottlenecks, as indicated by the rise in ABN AMRO's global supply bottlenecks index, which has returned to 'dominant supply bottlenecks/excess demand' territory [1]. These supply disturbances are reflected in lengthening delivery times and are contributing to higher input and output prices, as well as rising global inflationary pressures [1].
Van Dijkhuizen notes that these developments align with ABN AMRO's recent upward revisions to inflation forecasts for the eurozone, the Netherlands, the US, and China [1]. No specific market reactions or analyst opinions regarding future PMI trends are provided, but the report underscores the risk of persistent inflation and supply chain disruptions stemming from geopolitical tensions [1].
CONCLUSION
The global manufacturing PMI's decline, driven by supply bottlenecks linked to the Iran conflict, signals rising inflationary pressures across major economies. Emerging markets are most affected, while developed markets face longer delivery times. The market takeaway is a heightened risk of inflation and supply chain disruptions, with medium impact expected.