Weekly Global Economic Update: Insights from Deloitte — May 25, 2026
The latest Weekly Global Economic Update from Deloitte offers a comprehensive overview of recent economic developments influencing markets and industries around the world. Deloitte’s team of economists, led by Chief Global Economist Ira Kalish, analyzes current trends and events across key regions including the United States, China, the Eurozone, Japan, the Gulf region, and Southeast Asia.
United States: Mixed Signals in Manufacturing and Services
The U.S. manufacturing sector showed strong momentum in May, with the Purchasing Managers’ Index (PMI) for manufacturing hitting a 49-month high at 55.3, reflecting rapid growth. This was a notable rise from 51.6 in February, shortly before the Middle East conflict escalated. The surge was driven largely by companies building up inventories in anticipation of potential supply-chain disruptions due to geopolitical tensions.
Despite sharp increases in output, new orders for manufacturing were at their lowest point in two years, suggesting that the growth derived from precautionary stocking rather than sustained demand. The PMI for services edged down slightly from 51 in April to 50.9 in May, indicating very modest expansion.
When manufacturing and services PMIs were combined, the composite index sat at 51.7, showing overall modest economic growth that has remained steady since April. Deloitte’s analysts noted that the war in the Middle East is beginning to impact business confidence and activity, with rising costs forcing some job cuts and squeezing demand.
Looking ahead, persistent high prices for oil and commodities threaten to suppress consumer spending and corporate investment. With inflationary pressures mounting amid slowing growth, the United States faces an increased risk of stagflation — a challenging economic environment marked by stagnant growth and rising inflation.
China: Slowing Economic Growth Amid Rising Costs
Economic indicators released by the Chinese government for April signal a slowdown in economic activity. This is widely attributed to the inflationary shock from climbing global energy prices, itself largely a result of geopolitical conflicts affecting the Middle East.
Retail sales in China rose by only 0.2% year-over-year in April, marking the slowest pace since China lifted its COVID-19 restrictions in December 2022. Compared to the previous month, retail sales actually declined by 0.5%. Particularly hard hit were major durable goods sectors. For example, automobile sales plunged by 15.3%, home appliances by 15.1%, building materials by 13.8%, and furniture by 10.4%. Conversely, sales of tobacco and alcohol products, communications equipment, and cosmetics demonstrated solid growth, painting a complex picture of consumer behavior.
The pattern of weak sales of big-ticket items alongside relatively stable demand for smaller goods and services suggests Chinese households are delaying major purchases due to rising uncertainty and higher energy expenses.
China’s industrial production grew by 4.1% year-over-year in April, the slowest increase since July 2023, with output relatively unchanged from March. The manufacturing segment grew 4%, while utilities rose 5.3%. Growth was uneven across industries — sectors like computers and communications equipment (15.6% growth), railway and shipbuilding (8.2%), automobiles (9.2%), and oil and gas (4.6%) experienced expansion. However, the overall domestic demand environment remains subdued.
Insights from Other Regions
While the detailed update primarily focuses on the U.S. and China, Deloitte’s report also highlights ongoing challenges and developments in the Eurozone, Japan, the Gulf region, and Southeast Asia, underscoring the interconnectedness of the global economy in times of geopolitical shocks.
Summary
Deloitte’s Weekly Global Economic Update emphasizes the fragile state of global growth as rising commodity prices—driven by geopolitical tensions—challenge economic recovery and market stability. In the United States, precautionary inventory building has temporarily bolstered manufacturing figures, but underlying demand weakness and inflationary pressures limit optimism. Meanwhile, China’s slowing retail sales and modest industrial growth reflect broader concerns over energy costs and uncertainty.
As Deloitte’s team cautions, global economies face a complex environment where inflation and growth deceleration coexist, demanding careful analysis and adaptive strategy from businesses and policymakers worldwide.
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