The J.P. Morgan Global Composite PMI Output Index rebounded in April 2026, rising from 51.0 to 51.8, from the single-month sharpest PMI decline seen in March 2026. While this is positive, the underlying factors causing this rise is complex. The uptick was driven overwhelmingly by defensive stockpiling in lieu of the ongoing conflict, however, a broad rise in manufacturing along with strong regional acceleration was deemed key drivers.
What caused this rebound? And how did the PMI move regionally?
The Composite PMI is the broadest measure of global economic activity, combining both manufacturing and services sectors into a single index. In April 2026, the Composite PMI rose from 51.0 to 51.8, recovering from March’s sharp decline. A PMI reading above 50 indicates expansion in business activity relative to the prior month whilst below 50 signals contraction. There were several key factors driving this raise, one of which is the effects from the ongoing Middle East conflict and subsequent closure of the Strait of Hormuz This resulted in rising input costs for manufacturers; the fastest raise since June 2022, whilst supplier delays worsened to the levels of August 2022. In the meantime, stockpiling was another factor contributing. With overall supply disruptions and a U.S. tariff deadline approaching in July, buyers were pushed to build inventory, resulting in inflated order volumes. This trend is not unique to this conflict; it was notably seen during the Russia-Ukraine conflict as well where stockpiling and cautionary purchasing drove up the PMI early 2022 and faded out mid-2022. Following this, global PMI index began reflecting the true impact of the war causing a worldwide downturn of the PMI.
In addition to the above, manufacturing production grew for the ninth consecutive month, hitting a near five-year high, with growth across consumer, intermediate and investment goods. Of the 32 countries surveyed, 19 recorded growth. This was reflected in a high Manufacturing PMI value of 52.6 in April from 51.3 in March. This factor was further catalysed by overall regional growth in the largest economies. The U.S. was the clearest outperformer with the Manufacturing PMI climbing 2.2 points to 54.5; a four-year high. The cause for the uptick in US reflects the broader underlying factor of stockpiling, whereas other sectors remained fairly weak due to the ongoing war, impacting overall consumer behaviour. The Eurozone Manufacturing PMI saw an eight month high of 52.2 whilst the composite index fell to 47.4. Manufacturing picked up due to influx of new orders with front-loaded buying driving bulk purchasing to its highest since mid-2022. The slump in services is noteworthy which was coupled with contracting business confidence. China saw an uptick where the Manufacturing PMI rose to 50.3 supported by similar factors as seen in the Eurozone. Growth was supported by continued expansion in output and new orders, while export orders rose above 50 for the first time in two years. China’s Services PMI rose to 52.6 in April, up from 52.1 in March. This was supported by domestic demand given that new export businesses declined for the second consecutive month.
What is the implication of this?
While the April PMI headline number is positive, the underlying factor for the rise carries significant macroeconomic consequences. The stockpile-driven demand surge is widely considered unsustainable and likely to reverse in Q3 2026 as inventory buffers are filled and the artificial demand impulse fades. Inflation will show more transparent outcomes of this. The World Bank projects energy prices to rise 24% in 2026, with Brent crude averaging USD 86 per barrel versus USD 69 last year. As a result, fertiliser prices are rising and has gone up by 31% so far with urea specifically increasing much more. This will impact the agriculture sector and food production thereafter with rising input costs and overall driving up food costs. In developing economies, inflation is now forecast at 5.1% for 2026. The inflation trajectory constrains policymakers, particularly central banks. Already the Fed, ECB and Bank of Japan are dealing with supply-induced inflation, which means they face a risky trade should they raise interest rates. There can be a risk of borrowing costs rising globally which further depletes economic growth. There’s no doubt that the Hormuz closure has made global shipping significantly more expensive, for instance insurance premiums have risen with the added costs due to rerouting.
One thing that can change the current trajectory is the strait of Hormuz reopening which can drive down energy and freight costs and the turnaround for the global PMI can be driven by broad based improvements as opposed to factors such as stockpiling. Any further escalation or damage to energy infrastructure could push Brent crude further up and cause even higher inflation around the world, followed by rising input costs. However, the mere fact that regionally – in this case US, China, EU doing well indicates a counterbalancing mechanism even if stockpiling continues or is taken out of the picture which can anchor the global economy towards a positive direction in certain ways. Beyond the conflict itself, two trade policy events warrant close attention. The U.S. tariff restructuring is due on the 24th of July 2026, where country-specific tariffs are chosen over a blanket imposition. This could meaningfully restructure global trade flows depending on which economies face higher or lower rates. However, early-May there was a setback where the US Court of International Trade ruled that the 10% universal import tariff is “unlawful” and “unauthorized by law,”. This ruling blocks collection from specific plaintiffs, but the tariffs generally remain in effect until the July deadline expiration or further court action. Finally, the China-U.S. summit this week carries significant weight for Asia’s export-driven economies. Any agreement that clarifies the tariff outlook or eases trade tensions could provide a meaningful demand boost to regional manufacturing, while a breakdown in talks could further dampen uncertainty.
How will Sri Lanka be impacted from this?
While April PMI numbers is yet to be released by CBSL, March PMI data indicated an overall uptick where Manufacturing PMI was at 66.7 and services PMI at 59.4. Despite external challenges, this does point to a strong macroeconomic base and some sectoral strength.
The ability to sustain this momentum has gotten complicated as inflation for April jumped to 5.4% from 2.2% in March, mainly driven by an increase in energy cost. Given that domestic inflation was driven largely by energy prices rising causing transport costs to rise, the momentum in manufacturing PMI could slow down.
However, one thing that anchors Sri Lanka and prevents any long-lasting adverse damage is the macroeconomic conditions that have prevailed until now. Nonetheless, if the conflict worsens and energy costs goes up further this can start challenging the strong buffers that are in place.