Asia PMIs Signal Continued Pressure From Mideast Conflict

By Fabiana Negrin Ochoa and James Glynn

Surging cost pressures are weighing on businesses across Asia, according to new measures of activity that underscore the deepening economic impact of the conflict in the Middle East.

A fresh batch of S&P Global surveys reveals the extent to which these headwinds are affecting manufacturing and services sectors in Australia, Japan and India mid-way through the second quarter.

The data was most bleak in Australia, where the flash purchasing managers' index indicated the private sector suffered its steepest decline in new business in over four-and-a-half years in May.

The headline seasonally adjusted PMI composite output index slipped below the crucial 50.0 mark that separates growth and contraction, slipping to 47.8 in May from 50.4 in April.

New orders tumbled at the fastest pace since September 2021, leading to a fresh fall in output and prompting Australian firms to enter retrenchment mode, said Eleanor Dennison at S&P Global Market Intelligence.

"The level of confidence among Australian business was among the lowest on record, only matched by that seen during the first pandemic lockdown in March 2020," the economist said.

Private-sector activity also deteriorated in Japan, though manufacturing momentum was supported by continued stockpiling aimed at securing supplies before further price increases.

Since the war broke out in late February, the PMI surveys have shown surprisingly strong manufacturing activity as producers and customers alike rushed to lock in inventory as supply-chain disruptions leave businesses bracing for bigger bills and potential shortages of key raw materials.

That contributed to Japan's composite PMI staying above the 50 threshold, though output growth was modest, recording the slowest pace so far this year.

Japanese companies raised selling prices again in May in response to climbing expenses, the S&P data showed. Notably, the rate of charge inflation across both goods and services was the sharpest in nearly 19 years, though the pace still lags behind the rise in input costs.

The price data looks increasingly concerning for Japanese businesses, said Annabel Fiddes at S&P Global Market Intelligence.

"If cost pressures continue to mount and demand softens, business confidence and the broader economy could come under greater strain in the months ahead," she said.

In India, companies sought to offset mounting cost burdens by increasing selling prices, albeit with a greater degree of caution, according to the HSBC Flash India PMI compiled by S&P.

Output charges rose at a considerably softer rate than the corresponding increase in input prices, which was the sharpest since July 2022.

Despite a slowdown in the growth of new business and new export orders, Indian companies remain upbeat thanks to competitive pricing strategies, marketing efforts and expectations of better market conditions ahead.

Write to Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com and James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

May 21, 2026 02:44 ET (06:44 GMT)