DM price pressures have passed their peak, with the composite PMI and forward-looking subcomponents improving

Overview

This report is Goldman Sachs' global PMI monitor, focusing on manufacturing, services, employment, supplier delivery times, and price-related PMI subcomponents across developed markets. The key conclusion is that DM price pressures broadly eased in June, suggesting that the earlier price shock triggered by conflicts in the Middle East may already have peaked; at the same time, the DM composite activity indicator and forward-looking indicators improved.

Core views

The report argues that DM economic activity improved marginally but unevenly. The composite flash PMI moved into expansion territory, with both manufacturing and services contributing; forward-looking subcomponents also rose, indicating better expectations for future activity. However, multiple UK indicators weakened, and early U.S. business surveys sent mixed signals for manufacturing and services, showing that the recovery still differs by country and sector. On prices, both input and output price PMIs fell, which is the most important macro signal in this release.

Analysis framework

The report uses a high-frequency PMI tracking framework, aggregating the U.S., Euro area, UK, Australia, and Japan on a GDP-weighted basis and decomposing developed-market conditions into activity, forward-looking, employment, supply chain, and price subcomponents. It also cites early U.S. business surveys and European flash PMIs to verify consistency at the country and industry levels.

Methodology notes

• High-frequency macro activity trackingPMI Diffusion Index Analysis

  A PMI above 50 usually indicates expansion, while below 50 usually indicates contraction; changes in subcomponents are used to judge the marginal direction of economic activity, employment, supply chains, and price pressures.

  The report assesses short-term changes in growth momentum and inflation pressure in developed markets through manufacturing, services, composite PMIs, and price PMI subcomponents.

• Regional weighted aggregationGDP-weighted DM PMI

  DM is the GDP-weighted aggregate of the PMI indices for the U.S., Euro area, UK, Australia, and Japan.

  This method is used to form an overall developed-market view, although country-level divergence still needs to be observed separately.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Developed-market rates

  Lower price PMIs may ease inflation risk premia

  Strengths

  Input and output price subcomponents declined together, supporting the view that inflation pressure is easing marginally.

  Weaknesses

  Price PMI levels are still elevated, especially the manufacturing input price PMI at 72.9.

  Comparison

  Compared with activity indicators, the direction of price indicators is more consistent.

  Risks

  If geopolitical conflict or supply-chain disruptions flare up again, price pressure could rise once more.

• Developed-market equities

  Growth resilience and easing price pressure both improve risk appetite

  Strengths

  The composite PMI and the forward-looking subcomponents for manufacturing and services improved.

  Weaknesses

  Country-level divergence is clear, with weak UK services and employment subcomponents.

  Comparison

  U.S. manufacturing performed relatively well, Japan services improved, and the UK lagged.

  Risks

  If subsequent business surveys weaken, the growth-improvement signal may be revised lower.

• Foreign exchange

  Country-level PMI divergence may affect relative growth and policy expectations

  Strengths

  U.S. manufacturing PMI strengthened, and Japan services PMI improved.

  Weaknesses

  UK manufacturing, services, and employment indicators all weakened.

  Comparison

  The U.S. and Japan saw localized improvement, while the UK remained relatively weak.

  Risks

  Exchange rates are also driven by central-bank communication, interest-rate differentials, and risk appetite; PMI is only a short-term input.

Key data

• DM composite flash PMI51.1, up 0.8 points from the prior readingDriven by both services and manufacturing.
• DM services flash PMI50.4, up 0.9 points from the prior readingBack above 50 into slightly expansionary territory.
• DM manufacturing flash PMI53.9, up 0.2 points from the prior readingManufacturing remained in expansion.
• U.S. manufacturing flash PMI55.7, up 0.5 points from the prior readingRelatively strong at the country level.
• UK manufacturing flash PMI53.1, down 0.8 points from the prior readingStill above 50, but momentum softened marginally.
• Japan services flash PMI51.8, up 1.8 points from the prior readingServices activity improved.
• UK services flash PMI48.7, down 0.6 points from the prior readingFell into contraction territory.
• Manufacturing orders-to-inventory ratio1.10, up 0.04 from the prior readingDM manufacturing forward-looking subcomponent improved.
• Services future activity subcomponent59.9, up 2.7 points from the prior readingServices expectations improved.
• Australia composite employment PMI51.5, up 2.2 points from the prior readingEmployment subcomponent improved.
• UK composite employment PMI46.8, down 0.3 points from the prior readingEmployment subcomponent was weak.
• DM manufacturing input price PMI72.9, down 4.5 points from the prior readingPrice pressure remains high but has clearly eased.
• DM services input price PMI62.3, down 1.5 points from the prior readingServices cost pressure eased.
• DM manufacturing output price PMI61.1, down 2.1 points from the prior readingThe original text writes the sign as +2.1pt, but the meaning is a decline; interpreted here as easing in line with the report title and sentence context.
• DM services output price PMI56.2, down 0.8 points from the prior readingFinal selling price pressure eased.

Impact & implications

If DM price PMIs continue to fall, this will help ease market concerns about a reacceleration in inflation across developed economies and may reduce pressure on central banks to turn hawkish again. At the same time, the improvement in the composite PMI and forward-looking indicators supports a near-term view of growth resilience, but weakness in the UK and mixed signals from U.S. surveys suggest that asset pricing should not rely on a single headline PMI measure.

Risks

• Although price PMIs have eased, absolute levels remain high and inflation pressure has not completely disappeared.
• Weak activity and employment subcomponents in the UK show that growth is still diverging within DM.
• Early U.S. business surveys are sending mixed signals for manufacturing and services, so the monthly PMI improvement may not be firmly established.
• Supplier delivery times remain tight, and supply-chain disruptions may continue to affect prices and output.
• If geopolitical risks such as the Middle East conflict escalate again, energy and supply-chain costs could rise again.

What to watch

• Whether DM input and output price PMIs continue to decline.
• Whether country-level PMI divergence across the U.S., Euro area, UK, Australia, and Japan widens.
• Whether the manufacturing orders-to-inventory ratio can stay above 1.
• Whether the services future activity subcomponent can continue to improve.
• Whether UK services and employment PMIs recover from contraction territory.
• Whether supplier delivery times normalize or continue to signal tight supply chains.