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US manufacturers and service sector companies will focus on a key activity number next week to assess the damage from Donald Trump’s tariffs.
A monthly composite poll by S&P Global of purchasing managers, to be published on Wednesday, will be an important barometer of how manufacturers and service providers reacted to the US president’s tariff blitz on April 2 and the subsequent 90-day pause announced on April 9.
The consensus for manufacturing is projected to fall from 50.2 last month to 49.4, while the PMI for service providers is expected to fall from 54.4 to 52.8. A number above 50 indicates growth, while below 50 points to a contraction.
The data could “clearly be quite important for the financial markets”, said Stephen Stanley, chief economist for Santander US Capital Markets.
“I’m most interested in seeing how the manufacturing sector is responding to the tariffs,” he added. “Did orders plunge? Are inventories built up? How much have materials prices jumped?”
Stanley said that “the services index could be at least a partial read on the state of the consumer”.
The previous data, collected between March 12 and March 21, showed a net pick-up in US business activity, with service sector growth more than offsetting a fall in manufacturing output.
Even then, companies reported lowering their expectations for the remainder of 2025, “often citing worries over customer demand and the impact of aspects of the new administration’s policies”, the March S&P Global report said.
This month’s PMI poll data has been collected since April 9 and results will continue to be gathered until April 22, according to S&P Global. Will Schmitt
Is the UK economy holding up despite market uncertainty?
Next week will provide fresh readings on the health of the UK economy as analysts and investors try to gauge the impact of global trade uncertainty and tax changes made in the October Budget.
First, purchasing managers’ indices for April, due on Wednesday, will give an indication of business sector confidence.
The services sector is expected to post a reading of 51.3, according to economists polled by Reuters, where a number above 50 indicates expansion and under that level indicates contraction. It was 52.5 last month.
The manufacturing sector is expected to remain in contraction territory at 44.0, below the prior reading of 44.9.
Analysts at RBC Capital Markets said they were looking for some improvement in April’s numbers, but added: “The obvious risk to that is the impact on sentiment of the US tariff announcement earlier this month, though we would point out that the UK’s services exports to the US remain tariff-free, so the direct impact should be limited.”
Retail sales for March will be published on Friday, with Reuters-polled economists expecting them to dip 0.4 per cent month-on-month, from the 1 per cent month-on-month rise in February.
Recent economic data points have been positive, with stronger-than-expected GDP growth in February and then inflation falling faster than expected in March.
But traders are still expecting at least three quarter-point interest rate cuts from the Bank of England by the end of the year, from the current 4.5 per cent, according to levels implied by swaps markets — underlining nerves about the growth impact of Donald Trump’s trade war. Ian Smith
Has the Eurozone economy been affected by the trade war?
Investors will be looking for early signals about how US President Donald Trump’s trade war is affecting Eurozone economic activity in data released next week.
The HCOB Eurozone Composite purchasing managers’ index, a monthly poll of supply chain managers, is expected to show a lower reading in April as tariff uncertainty weighs on business sentiment.
The reading ticked higher to 50.9 last month, but economists polled by Reuters expect it to fall to 50.3 for April. A reading above 50 indicates expansion.
“There will be so much of the fear factor coming from the tariff announcement,” said Carsten Brzeski, global head of macro at ING research.
The survey includes separate measurements for the services and manufacturing sectors, with the latter predicted to fall to 47.5 from 48.6 the previous month.
In next week’s release, “services is the more interesting one”, said Brzeski. He is expecting to see a drop in the services figure as well as the widely-expected drop for manufacturing.
“If services remain relatively stable, that would be an indication that domestic demand is still solid in the Eurozone. If the PMI services also drops . . . it clearly shows us that the second quarter is another quarter to forget for the Eurozone.”
The European Central Bank was forced to cut interest rates by a quarter-point to 2.25 per cent this week after US tariffs brought growth concerns back into the foreground for the bloc. Emily Herbert
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