Global business activity lost momentum sharply in March as the war in the Middle East rattled demand, confidence, supply chains and pricing, leaving finance teams to navigate a more awkward mix of slower growth and faster cost inflation.

March’s J.P.Morgan Global Composite PMI, compiled with S&P Global, ISM and IFPSM, dropped to 51.0 from 53.3 in February, its weakest reading in 11 months. The index stayed above the 50.0 no-change mark for a 38th straight month, so the global economy was still expanding. Even so, the pace slowed materially, and the shift in the underlying detail was more troubling than the headline alone suggests.

What makes the move notable is not simply that activity cooled. Several gauges that matter most for corporate planning deteriorated at the same time. New business growth slowed to a 28-month low, partly reflecting a mild reduction in international trade flows. Business optimism fell to a five-month low and one of its weakest levels since the pandemic period in 2020. Global employment slipped into contraction for the first time in more than a year. At the same time, input price inflation accelerated to a 38-month high, while output charges rose at the fastest pace since April 2023.

Effectively, March brought a more uncomfortable operating backdrop of weaker demand, shakier confidence, slower hiring and renewed cost pressure.

Beneath the headline, the balance between manufacturing and services also shifted. The global manufacturing output index stood at 51.4, a three-month low, while the services business activity index fell to 50.8, a 28-month low. March was the first month since December 2022 in which manufacturing outpaced services. That is an important reversal because services have carried much of the global expansion over the past two years. Once that support starts to fade, growth looks more fragile.

Maia Crook, global economist at J.P.Morgan, captures the significance neatly: “The J.P. Morgan composite output PMI dropped 2.3-points in March, falling to its lowest point since the Liberation Day shock in April 2025. At 51.0, the index remains consistent with a trend-like pace in global growth. But the drag from the Middle East conflict has broadly disrupted what had been an encouraging start to the year: business confidence [as measured by the future output PMI] unwound recent gains; new orders fell to a 28-month low; and the employment index dipped below 50 for the first time in over a year.”

Broadly speaking, that loss of momentum was widespread. Of the six narrow sub-sectors tracked, five still recorded output growth in March, but all six posted weaker readings than in February. Financial services remained the strongest performer, even after slowing to a 10-month low. 

Consumer-facing sectors were in worse shape. Consumer services activity contracted at the fastest pace since November 2022, while consumer goods output rose only slightly and was the weakest among the sectors still growing.

Across countries, almost half of the 15 nations for which combined manufacturing and services data were available recorded falling output. Australia, Brazil, Canada, France, Italy, Kazakhstan and Russia all saw declines. Spain was the only economy to register faster expansion than in February. Optimism also weakened across most markets, with only Canada, India, Kazakhstan and Russia reporting improved sentiment.

Sector pressures deepen

The S&P Global Sector PMI adds another layer to the slowdown. After widespread growth in February, six of the 21 sectors tracked slipped into contraction in March, the highest number since July last year. Tourism and recreation posted the steepest fall in activity, with the contraction the sharpest in more than five years. Construction materials also weakened heavily, with production falling at the fastest pace in almost 18 months. Those two sectors also led the drop in new orders.

Elsewhere, the best growth came from technology equipment, where expansion accelerated to a seven-month high. Other financials and insurance also recorded solid gains, though both cooled from February’s pace. Telecommunications services climbed back to the top of the sector rankings, while industrials slipped, though it still ranked ahead of healthcare and consumer services.

Prices are where the sector data becomes especially relevant. Inflation pressures intensified across most of the 21 sectors in March. Only insurance, tourism and recreation, and software and services escaped that trend. Chemicals was hit hardest, recording the strongest cost inflation and charge inflation of any sector tracked.

That matters because chemicals sit deep in many supply chains. A sharp rise there rarely stays confined to one industry. It can feed through into packaging, manufacturing inputs, industrial materials and transport costs, eventually reaching companies that are several steps removed from the original price shock.

Supply conditions were already showing strain. The global manufacturing suppliers’ delivery times index signalled the steepest lengthening in vendor lead times for almost three-and-a-half years. That points to more friction in procurement and inventory management just as costs are climbing again.

Labour market signals were mixed but still instructive. Global PMI data showed employment edging down overall, with staff cuts in services and flat payrolls in manufacturing. The US, mainland China and the euro area were among the areas registering job cuts. At sector level, automobiles and auto parts continued to post the sharpest drop in headcount, although the pace eased from February. Technology equipment, by contrast, led job creation for a second straight month and was also the most optimistic about future growth.

Treasury implications come into focus

For treasury and finance teams, the combination of softer activity and firmer inflation is awkward because it clouds the interest rate outlook. Slower new business, weaker confidence and falling employment would normally support expectations of easier policy later on. Rising energy, commodity and input costs point the other way, especially if they begin to feed through into broader price-setting behaviour.

Planning, therefore, becomes harder in several areas at once. Cash forecasting is less straightforward when demand weakens unevenly across sectors and regions. Companies exposed to consumer services, travel-linked activity or industrial supply chains may need to reassess near-term revenue assumptions, while businesses tied to technology hardware or parts of financial services may still see pockets of resilience. The gap between those experiences is widening.

Working capital management also grows more complex when delivery times lengthen, trade flows soften and input prices jump. Some businesses may face pressure to hold more buffer inventory or bring purchases forward, while others may try to conserve cash and reduce stock exposure. Neither choice is cost-free. One ties up liquidity. The other raises the risk of disruption if lead times worsen further.

Funding and hedging decisions are likely to become more delicate too. A renewed energy shock can quickly lift market volatility, reshape rate expectations and raise the sensitivity of currencies and commodity-linked exposures. Companies with large fuel, freight or energy inputs may need to revisit hedge ratios and tenor assumptions. Borrowers weighing refinancing windows may also have to contend with a market that is trying to price both inflation persistence and weaker growth at the same time.

Margin pressure is another obvious risk. Where demand is cooling, passing through higher costs becomes harder. The PMI data already suggests that businesses are raising selling prices more quickly, but that does not mean all sectors will be able to defend profitability equally. Chemicals may have pricing power for now. Consumer-facing industries may not.

None of this points to a collapse in global activity. The composite reading remains above 50, and some areas, especially technology equipment and parts of financial services, are still expanding at a healthy pace. Yet March’s data does suggest that the balance of risks has become less comfortable. The global economy is still growing, but the cushion is thinner, the inflation pulse is stronger and the sector split is wider.

Crook’s final point is the one many finance teams are likely to recognise immediately: “Accompanying these discouraging growth signals was a jump in price PMIs, with the indices tracking input costs and output charges now at levels last seen in 2023.”

That leaves companies with a familiar but difficult brief. Growth has not stalled, but the margin for error has narrowed. In an environment shaped by geopolitical disruption, sticky cost pressure and weakening demand, the priority is likely to be resilience: tighter forecasts, closer control of liquidity, sharper exposure management and faster responses to shifts in both markets and the real economy.