Middle East Conflict Impacts Economic Growth, S&P Global Economist Says

On May 21, S&P Global's Chief Business Economist Chris Williamson highlighted the growing economic impact of the Middle East conflict, as reflected in business surveys. According to Jin10, preliminary May PMI data indicates only moderate growth in business activity, with demand pressured by further price increases. Companies are cutting staff due to concerns over rising costs and economic outlook. Following weak data in April, the May PMI suggests that second-quarter annualized GDP growth is unlikely to exceed 1%. However, even this slow growth rate may not persist. Over the past three months, order growth has slowed to its lowest in two years, and the boost from precautionary inventory accumulation due to fears of further price hikes and supply delays will not last indefinitely. Demand is expected to cool further as prices rise. Business costs are increasing at the fastest rate since the 2022 energy price shock, and these costs are being passed on to customers through significantly higher sales prices. The survey data suggests that inflation may intensify just as the economy cools.