In March, we saw only a limited passthrough to overall prices charged, but this wasn’t entirely true at the manufacturing level. It will be crucial to monitor whether this inflation impulse spreads to services pricing, as this would raise the risk of core inflation and inflation expectations increasing, which is what central banks will be eager to avoid. Clearly, the longer oil and gas market disruptions continue, the greater the risk that an inflation spike turns into a stickier step up in the overall price level, as we saw in 2022.

What should you be looking out for when we release the April PMI data?

Right now, the focus is on how central banks will respond to the energy price and supply shock. We will need to watch the Output Prices PMIs, as these will give us greater information on so-called first-round effects, in other words, how companies are pricing their own goods and services in response to this inflationary shock.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.