Weekly Global Economic Update – May 26, 2026
By Ira Kalish, Chief Global Economist, Deloitte Services LP
Deloitte Insights presents its Weekly Global Economic Update, examining the latest economic developments worldwide amid ongoing geopolitical tensions and their effects on markets and industries.
United States: Manufacturing Growth Fueled by Precautionary Inventory Building
Recent data reveals a notable uptick in the US manufacturing sector’s purchasing managers’ index (PMI). The PMI surged to a 49-month high in May, reaching 55.3, signaling rapid expansion. This rise, however, is largely driven by precautionary inventory accumulation due to concerns over supply chain disruptions amid the Middle East conflict.
PMIs serve as forward-looking indicators of economic health by measuring subindices such as output, new orders, export orders, employment, pricing, inventories, and sentiment. A reading above 50 denotes growth, with higher numbers reflecting faster expansion.
- Manufacturing PMI increased from 51.6 in February to 55.3 in May.
- Despite the strong output numbers, new orders in May registered their lowest levels in two years.
- The divergence is attributable to inventory stockpiling businesses undertook to buffer against potential supply disruptions and price hikes.
On the services front, the PMI slightly declined from 51 in April to 50.9 in May, suggesting only modest growth. The composite PMI, which combines manufacturing and services, held steady at 51.7, indicating overall modest economic expansion.
S&P Global highlighted emerging economic headwinds tied to the Middle East conflict, noting:
“Business activity growth is modest as rising prices squeeze demand and firms cut jobs amid cost concerns. Managing GDP growth above 1% annualized in Q2 will be a challenge.”
Looking ahead, sustained high commodity prices—particularly oil—threaten to dampen demand and fuel inflation. Firms are facing cost increases unseen since the 2022 energy shock and are passing these on to consumers. Analysts warn this environment may heighten stagflation risk, characterized by slow growth coupled with rising inflation.
China: Economic Growth Slows Amid Rising Commodity Prices
Data released by the Chinese government for April points to a deceleration in economic momentum, likely influenced by rising prices of oil and commodities linked to the Middle East conflict. As the world’s second-largest economy, China’s slowdown attracts global attention.
Key details include:
- Retail sales grew by just 0.2% year-over-year—the slowest pace since December 2022 after the initial COVID-19 reopening—while declining 0.5% compared to the previous month.
- Sales of major durable goods fell sharply:
- Automobiles down 15.3%
- Home appliances down 15.1%
- Building materials down 13.8%
- Furniture down 10.4%
- Conversely, sectors such as tobacco and alcohol (+11.7%), communications equipment (+6.2%), and cosmetics (+4.7%) experienced sales increases.
- The overall pattern suggests households are deferring big-ticket purchases amid uncertainty and higher energy costs.
Industrial production rose by 4.1% year-over-year, marking the slowest growth since July 2023. Output remained flat month-over-month. Manufacturing production increased by 4%, and utilities output by 5.3%.
Manufacturing segments showing growth included:
- Computers and communications equipment (+15.6%)
- Railway and shipbuilding (+8.2%)
- Automobiles (+9.2%)
- Oil and gas (+4.6%)
Despite these pockets of strength, domestic demand softness is evident, reflecting cautious consumer and business sentiment amid global challenges.
Other Regions and Outlook
The report also covers economic impacts in the Eurozone, Japan, the Gulf region, and Southeast Asia, though detailed regional data was not included in this summary. The ongoing geopolitical tensions and related commodity price volatility continue to influence economic activity worldwide.
Conclusion
This week’s data underscores the complex interplay of geopolitical risks, commodity price shocks, and cautious business and consumer behavior shaping the global economy. In the United States, firms are building inventories amid uncertainties, while the Chinese economy shows signs of slowing amid weaker consumer spending and industrial growth. The economic outlook remains cautious as elevated inflation risks and supply chain concerns persist.
For further insights and detailed reports, Deloitte Insights continues to provide comprehensive analysis through its research centers and economic outlook publications.
About the Author
Ira Kalish is Chief Global Economist and Managing Director for Research & Insights at Deloitte Services LP. He specializes in analyzing global economic trends and their impact on business environments.
Contact: [email protected] | +1 310 420 0392
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