Global exports downturn deepens in May as war hits trade in services

The worldwide Purchasing Managers’ Index™ (PMI^®) surveys indicated that global trade fell for a third successive month in May as the war in the Middle East continued to hit trade flows, especially for services. However, manufacturing exports also fell into decline, reflecting a rising number of economies reporting lower exports, hinting at a fading of the boost from stock building seen in prior months.

Global trade flows fall amid ongoing war impact

The seasonally adjusted Global PMI New Export Orders, sponsored by J.P.Morgan and compiled by S&P Global, fell from 49.6 in April to 48.9 in May, running further below the 50.0 neutral mark to signal a third successive month of falling trade volumes and the steepest decline since last October.

Goods exports fell worldwide for the first time in four months during May, but the more worrying decline was again reported for trade in services, where export volumes fell at the sharpest rate since December 2020.

Not only has the war caused travel and shipping disruptions, but demand has also been subdued as prices spiked higher for many goods and services, primarily due to the surge in oil and gas prices. However, these factors have affected sectors to different degrees, in part due to demand for goods being relatively more inelastic than for services amid stockpiling of goods in response to concerns over supply availability.

Worldwide reports of orders being lost due to customers resisting high prices in the services economy have been running at around four times the long run average over the second quarter so far, whereas in the manufacturing sector the incidence is just over twice the long-run average.

However, manufacturers have been benefitting in recent months from the highest incidence of ‘safety stock’ building since the pandemic and subsequent Russian invasion of Ukraine, reflecting worries over supply constraints emanating out of the war in the Middle East as well as concerns that prices may further  rise. Anecdotal evidence collected from PMI survey contributors nevertheless indicates that some of this stock building boost appears to have faded in May compared to April.

Looking in more detail using global PMI sector data, since the outbreak of war on 28 February, the steepest drop in export trade has been reported for financial services followed by consumer services, of which especially steep declines have been witnessed for real estate, banking, tourism and recreation.

Telecoms and healthcare have shown the greatest resilience, with autos and tech equipment reporting especially robust gains among the manufacturing sectors tracked by the PMI.

US suffers steepest trade fall among advanced economies

Among the major advanced economies, the United States again reported the steepest fall in export orders during May, registering the sharpest decline since April 2025. US goods exports fell for an eleventh successive month as producers commonly blamed tariffs for lost orders, but it was the service sector which saw an especially sharp decline in export orders; the largest since the pandemic lockdowns of 2020.

Eurozone exports also continued to fall, likewise fuelled by a sharp drop in services trade flows, but exports stabilised in the UK and modest growth was again reported in Japan, albeit in both cases with rising goods trade helping alleviate falling services exports. Japan’s goods exports in fact notably grew at the fastest rate for five years. Falling exports were meanwhile reported in both Canada and Australia.

While India continued to lead the largest emerging markets in terms of export performance, its increase was the weakest for 19 months, linked to weaker goods export growth.

Exports from mainland China meanwhile slipped into decline for the first time since last December, with a dip in goods sales countering a rise in services exports. Steep export declines were meanwhile reported in both Brazil and Russia, reflecting reduced trade of both goods and services.

ASEAN manufacturing exports fall at fastest rate since September 2024

Looking in more detail at goods exports, just 13 of the 30 economies tracked by the PMI reported higher sales in May. The steepest gains were reported in Ireland, Taiwan, India, Japan and the Netherlands. The steepest declines were meanwhile reported in the Philippines, Brazil, and France.

The ASEAN region notably again reported an especially weak export performance, registering the steepest decline for 20 months.