June’s flash purchasing managers’ indices (PMIs) point to a world economy moving at sharply different speeds, with manufacturing often outperforming services and the Middle East conflict distorting both demand and costs.

Across the economies of Australia, Japan, India, the eurozone, the UK and the US, composite readings divided evenly between expansion and contraction. India, Japan and the US remained above the 50 no-change mark, while Australia, the eurozone and UK stayed marginally below it. India continued to lead despite slowing, Japan and the US gained momentum, Australia and the eurozone moved closer to stabilisation and the UK weakened further.

Headline numbers only tell part of the story. Factory activity was stronger than services in every market except Australia, where manufacturing output still fell slightly. Elsewhere, producers benefited from precautionary buying as customers brought purchases forward to guard against supply disruption and further price rises linked to the war in the Middle East.

Such support may prove temporary. New orders weakened in several economies, service activity remained subdued and confidence stayed below long-run norms. June’s flash data therefore suggest that growth is being kept alive in part by behaviour designed to protect companies from future shocks, rather than a broad revival in underlying demand.

Collectively, the releases describe a global economy in defensive mode. Businesses are carrying more stock, accepting longer delivery times and limiting hiring while they wait for clearer signals on energy prices, shipping routes and final demand. That combination can sustain production briefly, but it offers a fragile foundation for the second half.

Front-loaded demand lifts factory output

US business activity gathered pace as the composite index rose to 52.2 from 51.5, a five-month high, although the improvement remained heavily concentrated in manufacturing. Factory output reached 57.7, its highest level in 59 months, while the manufacturing PMI rose to 55.7, a 49-month high. New orders increased at the fastest rate for just over four years and input inventories posted their second-steepest rise in the survey’s history.

Precaution drove much of that strength. Factories increased purchasing at the fastest pace since September 2021, while inventories accumulated as companies moved to secure materials before potential shortages or further price rises. Supplier delays also became more widespread as shipping disruption and tariffs affected delivery schedules.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The survey signals that current output levels are consistent with the economy struggling to grow much faster than a 1% annualised rate in the second quarter.”

A similar pattern appeared in the UK. Manufacturing output rose to 53.6, its highest level in 21 months, as clients built safety stocks ahead of anticipated price increases. Yet manufacturing new-order growth weakened to a six-month low, suggesting that the boost from frontloading was already fading. The wider manufacturing PMI also eased to 53.1 from 53.9.

UK services moved in the opposite direction. Activity fell to 48.7, its weakest reading in 41 months, pulling the composite index down to 49.4. Overall new business declined at the fastest pace in 14 months and employment fell for a 21st consecutive month.

“A disappointing June ‘flash’ PMI indicates that the economy contracted for a second successive month, albeit at only a 0.1% rate and merely flat-lining over the second quarter as a whole,” Williamson said, regarding the UK data.

Eurozone manufacturers also remained in expansion, with output at 51.2 and the headline factory PMI at 51.3. Purchasing activity stopped rising, however, ending a three-month run in which businesses had sought to secure inputs after the outbreak of war. Stocks of purchases and finished goods both fell in June.

Services remained the drag. Activity improved to 48.9 from 47.7 but stayed in contraction, while the composite index rose to 49.5. New business fell for a fourth month, employment edged lower and Germany recorded its steepest fall in business activity for 18 months.

“The eurozone economy is showing enough resilience to just about stay out of recession,” Williamson said. “The flash PMI registered only a slight drop in business activity in June, meaning the survey is indicative of unchanged GDP over the second quarter.”

Asia keeps growing but momentum becomes harder to read

In Asia, Japan showed clear acceleration as its composite index climbed to 52.5, signalling the strongest expansion in three months. Manufacturing output rose to 54.3, while services returned to growth at 51.8. Demand strengthened across both sectors. Manufacturers reported their quickest rise in sales since January 2022, helped by customers building inventories in response to supply disruption and fears of further price increases. New export orders rose solidly for goods producers, although services companies recorded another marked fall in foreign demand.

Growth was accompanied by pressure on capacity. Backlogs increased at the fastest pace in four months and manufacturing payrolls rose at the steepest rate for more than eight years. Yet input costs accelerated for a fifth month, with energy, fuel and raw material prices all affected by the war.

“The current period of growth is partly being driven by stock-piling efforts amid the war in the Middle East, and these efforts are likely to fade in the months ahead as warehouses fill and cost pressures bite,” explained Annabel Fiddes, economics associate director at S&P Global Market Intelligence.

India remained comfortably ahead of the other economies, though growth lost some speed. The composite index fell to 57.4 from 59.3, its weakest since March, as services growth slowed to a 17-month low and manufacturing output eased to a two-month low.

New orders still rose sharply but at the slowest pace in three months. Export trends diverged, with services growth accelerating as manufacturing lost considerable momentum. Hiring continued, but only marginally and at the weakest rate in the current six-month sequence.

Inflation offered a more encouraging signal. Input cost growth slowed for a third month to its weakest since January, while output charges rose at the softest pace in six months. Competitive pressure and weaker demand made some companies reluctant to pass through higher costs.

“Private sector activity eased a bit in June,” commented Pranjul Bhandari, chief India economist at HSBC. “New export orders remained resilient and the order-to-inventory ratio ticked up, pointing at resilient manufacturing activity down the line.”

Australia came closest to stabilisation rather than expansion. Its composite index rose to 49.8 from 48.7 and services activity improved to 49.9, but manufacturing output remained below 50 at 48.9. New orders continued to fall, extending a decline that began in March, while export demand weakened again.

Confidence was the greater concern. Sentiment dropped to its lowest since March 2020 and, excluding that pandemic-affected month, the weakest since the series began more than a decade ago. Employment nevertheless returned to growth as companies prepared for future projects.

“Any improvement in shipping flows through the Strait of Hormuz would also help to alleviate the severe supply-chain disruption still impacting manufacturers,” revealed Andrew Harker, economics director at S&P Global Market Intelligence.

Services expose the weakness beneath the factory data

Across the six economies, services generally gave a more cautious reading than manufacturing. The UK and eurozone remained in contraction, Australia was almost flat and US services expanded only modestly at 51.3. Japan returned to growth, while India remained strong at 57.3 despite losing momentum.

Weak household and business confidence featured repeatedly. US service providers cited elevated prices, higher interest rates and cautious customers. UK firms pointed to lower confidence, domestic political uncertainty and pressure on consumer-facing sectors. Eurozone services remained constrained by weak new business, even as tourism and leisure demand began to recover from the initial disruption caused by the conflict.

That divergence is important because services dominate output and employment in the major developed economies. Stronger factory readings can lift composite PMIs for a time, but they offer less reassurance when production is being supported by inventory accumulation rather than final demand.

A manufacturing-led upswing also changes the quality of growth. More capital is absorbed by materials and inventories, while weaker service demand limits the breadth of revenue gains. Companies may therefore see activity increase without a comparable improvement in cash conversion, margins or confidence.

Exports provided little help. US exports of both goods and services continued to decline. Australia recorded another fall in export orders. Japan’s overall export growth slowed to a six-month low, while India’s international sales posted their weakest increase in 21 months.

Labour markets also softened outside Japan and Australia. US employment fell for a second month and for the third time in four months, with manufacturing headcounts cut at the fastest pace since the early 2020 lockdowns. Eurozone employment declined for a sixth consecutive month, while UK services companies cut headcounts sharply even as manufacturers continued to hire.

The contrast between output and jobs was particularly stark in America. Output strengthened, but factories cut labour as concerns about demand sustainability and raw material costs outweighed the temporary boost from inventory building. Such caution suggests companies are protecting margins rather than preparing for a durable acceleration.

Inflation cools unevenly as supply chains stay strained

War-related energy and shipping costs remained the dominant inflation thread, although June brought early signs of relief. Input cost inflation eased in Australia, India, the eurozone, the UK and US. Japan was the exception, recording its fastest increase since July 2022.

The direction was encouraging, but price pressure remained elevated. US input costs rose at the third-fastest rate since the start of 2023, while service-sector selling price inflation reached an 11-month high. UK costs continued to reflect higher energy, chemicals, metals, IT hardware and shipping prices, as well as labour costs linked to government policy changes.

Eurozone input inflation slowed to its weakest since February, while output price inflation eased to its weakest rate in three months. Most survey responses were collected before the memorandum of understanding for a cessation of hostilities between the US and Iran was signed on 17 June, meaning any improvement in energy or shipping conditions may not yet be fully reflected.

Australia also reported slower cost and selling price increases, though transport and fuel remained prominent. In India, inflation moderated more clearly, giving businesses less need to raise charges in a softer demand environment.

Supply chains remained a source of risk. Eurozone manufacturers reported another substantial lengthening of delivery times, while 27% of UK manufacturers saw delays compared with 4% reporting improvement. US supplier performance deteriorated to the greatest extent since August 2022.

Lower energy prices late in the survey period may offer some respite, but the PMI evidence still points to higher working capital requirements. Longer lead times, precautionary inventories and volatile input costs tie up cash even where output is growing.

A fragile second half of 2026 takes shape

June’s PMIs leave the global economy short of a convincing growth engine. India remains firmly in expansion, although slower demand growth, weaker hiring and falling business confidence point to a loss of momentum. Japan has accelerated, but part of that improvement reflects precautionary stockbuilding that may fade as inventories fill and cost pressures bite. The US is growing more quickly, though its improvement is heavily concentrated in factories and accompanied by falling employment. Australia is close to stabilisation, while the eurozone and UK remain marginally in contraction.

Manufacturing has become the main shock absorber. Stockbuilding has supported orders, output and purchasing across Japan, the eurozone, the UK and US, giving businesses a buffer against disrupted shipping and rising prices. The same behaviour risks flattering current activity while borrowing demand from future months.

Services tell the more sobering story. Weak confidence, high prices and cautious customers are limiting growth across the largest Western economies. Employment data reinforce that caution, particularly in the UK, the eurozone and US.

Regional divergence complicates planning across cash, funding and risk for corporates. Stronger factory activity may increase inventory, financing and hedging needs, while weak service demand calls for caution in sales forecasts. Supply delays and uneven inflation are also keeping liquidity and working capital under pressure, while currency and rate exposures may diverge as central banks confront sharply different combinations of growth, employment, inflation and supply disruption.

The next set of surveys will show whether lower energy prices and reduced Middle East tensions can turn June’s tentative improvement into broader growth. Without a recovery in final demand, however, the global picture remains dependent on temporary stockbuilding and vulnerable to another shock.