Global PMIs: Inflation divergence watch – Standard Chartered

Global manufacturing PMIs rebounded in June across sub-sectors and sub-indices. US-China trade normalisation, front-loading ahead of 9 July tariff deadline may have contributed to gains. Reported price pressures suggest that US-China inflation divergence is increasing, Standard Chartered’s economist Ethan Lester reports.

Manufacturing output rebounds ahead of 9 July

“The global aggregate PMI for June shows a monthly rebound in manufacturing activity across consumer, intermediate and investment goods; current output saw its largest monthly rise since June 2022. Higher new order inflows supported a renewed rise in production, although the rate of expansion was marginal amid subdued new export books. The monthly improvement in production may have been boosted in part by inventory building ahead of the 9 July expiry of the 90-day pause in US reciprocal tariffs, and by normalising bilateral China-US activity since trade talks in mid-May.”

“Global input costs and selling price inflation accelerated despite subdued commodity prices pressures, which were at their lowest level for June since early 2024. Of 26 tracked commodities, the largest upward deviation in price pressures was in semiconductors, which are currently subject to US Section 232 and 301 investigations that could lead to sectoral tariffs. Aggregate raw-material shortfalls remained lower than the long-run average as trade diversion helped to offset tariff-related supply disruptions.”

“Price pressures are diverging – reported input and output prices in the US rose to multi-year highs, while both measures have been declining in China for several months. Historical comparisons indicate that the US PMI output price index is consistent with a material acceleration in CPI inflation in the coming months. In contrast, the same index for the euro area and UK points to inflation in line with ECB and BoE targets.”