This week’s big data test has now landed and the picture is much sharper than most had expected. The latest flash purchasing managers’ index (PMI) readings – the monthly surveys that track how businesses are feeling in real time – told three very different stories across the UK, the eurozone and the US. The common thread was inflation. The surprise was who came out on top.
In Britain, the surveys were stronger than anyone had been pencilling in. Business activity jumped to its highest level in three months and pulled comfortably away from the 50 mark that separates growth from contraction. Some of that came from a rush to place orders before prices rise further, but the headline number was still a genuine upside shock. It came with the biggest monthly jump in business input prices since the survey began in 1996.
The eurozone went the other way. Activity fell into contraction for the first time in well over a year, with services registering their weakest reading in more than five years. Germany saw business output shrink for the first time in close to a year and France slipped further. Berlin’s Economy Ministry had already chosen earlier in the week to halve its 2026 growth forecast. Gross domestic product (GDP) is now seen rising just 0.5% this year, rather than the 1% pencilled in back in January. Italy trimmed its outlook on the same day.
Put together, the mood music has shifted. For weeks the question was whether the UK economy could stand up to higher oil prices and the weight of the new tax year. It is now Europe’s traditional growth engine that looks most exposed, and the markets have taken note. The euro has slipped to a two-week low against the dollar and the pound has quietly strengthened against the single currency.
Across the Atlantic, US business activity picked up this month, but the same survey flagged the sharpest rise in companies’ selling prices since mid-2022. That sits uncomfortably alongside preliminary April consumer sentiment data from the University of Michigan, which showed year-ahead inflation expectations jumping to 4.8%. The final reading lands this afternoon.
None of this is playing out in a calm backdrop. The US naval blockade of Iran’s ports remains in place. Three ships were attacked in the Strait of Hormuz earlier in the week and two of them were seized. Overnight, Donald Trump ordered the US Navy to “shoot and kill” any Iranian boats laying mines in the strait. Brent crude has climbed back above $105 a barrel with no sign of peace talks restarting.
It is a heavy end to this week and an even heavier start to the next. The Federal Reserve, the Bank of England and the European Central Bank all deliver interest rate decisions inside 48 hours on Wednesday and Thursday. Heading in, the mood has been reshaped: a UK hold that could tilt hawkish, a euro area central bank weighing high inflation against a newly shrinking economy and a US central bank fielding pressure from every direction.
