Weekly Global Economic Update

Week of April 20, 2026

• Equity prices recover after initial shock
• The oil market could face more pressure
• Uncertainty makes monetary policy difficult
• Chinese exports weaken

Equity prices recover after initial shock

• In the United States and Japan, equity price indices are now back to roughly where they were before the Middle East conflict began—with the S&P 500 index at a historic high. In Europe, equity price indices have rebounded sharply but remain below pre-conflict levels. Around the world, equity prices had fallen sharply after the conflict began. Yet, prices began to rebound at the time the ceasefire was announced. And although the Strait of Hormuz remains closed, market pricing suggests that investors are increasingly leaning toward the view that the conflict could prove relatively short-lived—and that there could be a credible exit ramp for both the United States and Iran.

Why the confidence? It probably has to do with the current US blockade of Iranian ports, which seems to be a new strategy for the United States. The previous one aimed at Iran’s military did not succeed in limiting Iran’s ability to retaliate or to block the Strait of Hormuz. Moreover, Iran continued to sell oil and generate revenue, especially at a higher price. Now, with the blockade, Iran could face difficulties in generating revenue. Investors may therefore believe that the blockade could increase economic pressure and potentially strengthen the incentive for renewed negotiations and some form of concessions.

Meanwhile, Brent crude prices have fallen as investors reassess the likelihood of the conflict ending soon. And the drop in oil prices has probably influenced the rebound in equity prices. Moreover, the decline in oil prices appears to have weighed on the value of the US dollar. If investors do come to expect an end to the conflict, they may revert to thinking about a potential easing of US monetary policy, especially once the new Fed chair takes office.

But are investors being too confident? After all, even if an agreement is reached soon between the United States and Iran, it could take some time to restore the flow of oil and other commodities through the strait. Plus, the significant damage done to Qatar’s principal site for producing natural gas will like take a considerable time to repair, which, in turn, could limit the flow of natural gas to Europe and Asia, potentially keeping prices elevated and contributing to higher inflation levels. In addition, the disruption to fertilizer exports could have an onerous impact on agricultural output and, consequently, food prices in the months to come.

Also, the sharper rebound in US equity prices versus European equity prices likely has to do with differing expectations for growth and inflation on the two sides of the Atlantic. The likelihood of sustained higher natural gas prices in Europe could translate to higher inflation, tighter monetary policy, and slower economic growth, than otherwise. In the United States, on the other hand, natural gas is produced domestically, which may limit the degree of price pressure the country faces.

The oil market could face more pressure

• With oil prices staying elevated in March, global demand for oil declined, according to the International Energy Agency (IEA): This was not unexpected. Basic economic theory tells us that, when the price of a commodity rises, demand declines. The question is, by how much? Economists know that the effects of price elasticity on the demand for oil (the sensitivity of demand to a change in prices) is low. That is, it is difficult for consumers of oil and oil-related products to reduce purchases in the short term. If someone drives to work, an increase in gas prices does not necessarily lead to less driving.

Thus, it is notable that demand did indeed fall significantly. Specifically, the IEA reported that, in March, global demand for oil was down 3.4% from the previous month and is expected to fall a further 1.1% in April. If so, this would leave global demand at the lowest level in three years. The IEA also said that the decline in demand was mostly centered around the Middle East and Asia. It said that, if prices remain elevated going forward, it is reasonable to expect demand to weaken in other parts of the world. Specifically, it said that “demand destruction will spread as scarcity and higher prices [will] persist.”

Although global demand has eased, it has not been nearly sufficient to offset the decline in supply. This suggests that, if the conflict continues, prices may have to rise much further to bring demand down to the level of supply. The IEA said that, with the effective closure of the Strait of Hormuz, there has been a decline in global production/distribution of about 13 million barrels per day—much more than the decline in demand of roughly 4 million barrels per day.

Finally, US exports of crude oil as well as refined products have risen sharply since the start of the conflict. US crude shipments have risen by about 1 million barrels per day, or about 25% higher than the norm. Global purchasers of crude and refined products are seeking alternative supplies as the global market contracts. In addition, US imports of crude oil have declined. One result has been a surprising decline in US inventories. Plus, this trading activity also appears to have exacerbated the rise in prices paid in the United States. As the crisis continues and demand for US crude grows, further US export growth could add to US inflation and create political tension within the country. Indeed, I have been asked by some clients about the possibility of US export restrictions. The US administration says that this is currently not being contemplated, but that could change if the situation worsens.

Uncertainty makes monetary policy difficult

• Uncertainty is making the job of central bankers more difficult. They can reasonably assume that inflation will rise due to the increase in prices of oil, gas, and other commodities. Yet, how far inflation goes will depend, in part, on how long the conflict lasts and how much disruption to supply stems from damage to Middle Eastern infrastructure. If central bankers expect a short-lived conflict in which the boost to inflation is temporary, they would likely undertake a different monetary policy than they would if the rise in inflation is more sustained.

Meanwhile, one central bank has already made an important decision: The Monetary Authority of Singapore (MAS) tightened its monetary policy last week for the first time in four years. The MAS commented that “even if supplies from the Middle East are restored, global energy prices are likely to remain elevated for some time. Deliveries will be lagged, supply will take time to recover fully, while governments seeking to rebuild energy reserves will add to pent-up demand.”  Thus, Singapore authorities are anticipating a somewhat prolonged rise in prices, at the least.

It should be noted, however, that the MAS has a somewhat unique manner of managing monetary policy: It does not control interest rates. Rather, it targets the value of the currency. The MAS has a long-term policy of allowing the Singapore dollar to gradually appreciate against the US dollar. It shifts monetary policy by changing the speed at which the Singapore dollar appreciates. In this case, it chose to increase the rate of appreciation, thereby reducing the inflationary impact of a rise in the price of imported oil. However, faster appreciation can also weigh on export competitiveness, thereby slowing the economy. Trade is such a large share of Singapore’s gross domestic product that anything affecting trade can affect the overall economy.

Meanwhile, futures markets now appear to be expecting the US Federal Reserve to keep monetary policy steady for the remainder of 2026. They also appear to be expecting the European Central Bank and the Bank of England to tighten monetary policy this year. That divergence likely reflects an expectation that inflation pressures could be stronger in Europe than in the United States. And that has much to do with the disruption to the flow of natural gas from Qatar.  Europe is heavily dependent on Middle Eastern gas and has already seen a big increase in gas prices. In the United States, on the other hand, natural gas is domestically produced and consumed and, as such, the price has not moved very much.

In any event, past episodes of inflation and recessions have sometimes been exacerbated by central bankers’ monetary policy mistakes. The problem is that making monetary policy is sort of like driving a car facing backward. You know where you’ve been while you know where you want to go, but you cannot see where you’re going and must make a guess.

In the 1970s, two major central banks made two different decisions that had significant implications: When the global price of oil quadrupled in 1974, the US Fed was initially hesitant to raise interest rates, fearful that doing so might cause the economy to slow down. Moreover, it was not clear at that time that the rise in oil prices would be sustained (it was). Meanwhile, the Bundesbank, the central bank of West Germany, chose to quickly tighten monetary policy with the goal of stifling inflation expectations, even if it meant stifling economic growth. The result, however, was that inflation soared in the United States far more than in West Germany. Plus, the United States experienced a deep recession while the recession in West Germany was more muted. The lesson? Acting quickly to stop inflation was the better choice. It appears that the Singapore authorities have taken this lesson to heart.

Chinese exports weaken

• Chinese export growth slowed significantly in March, likely due to the uncertainty created by the conflict in the Middle East. Exports (denominated in US dollars) were up 2.5% in March from a year earlier—the slowest increase since October 2025. Meanwhile, imports were up 27.8% from a year earlier—the biggest increase since November 2021. This was partly driven by the steep increase in the price of imported oil. But it was also driven by a continued strong effort to import critically important minerals. Let’s look at the details:

In March, Chinese exports to several countries continued to grow at a healthy pace. In part, this reflected continuing strong global demand for key products for which China has a competitive edge. These include technology products as well as clean-energy products. Yet, this was offset by an especially sharp decline in exports to the United States, which were down 26.5% from a year earlier. Meanwhile, exports were up 8.6% to the European Union, up 6.9% to Southeast Asia, up 35.2% to Taiwan, up 11.9% to Australia, and up 19.6% to South Korea.

Going forward, a prolonged elevation of oil, gas, and other commodity prices could weaken global demand for many of the products sold by China. Plus, higher commodity prices could boost the cost of producing those products, thereby leading to higher prices paid for Chinese products and/or lower profit margins for Chinese companies.

Meanwhile, Chinese imports surged in March, although imports from the United States barely grew (up by only 1%). As such, trade between China and the United States continues to diminish.  However, imports from Australia were up 87.6%, likely due to a surge in commodity imports.  Plus, imports were up 35.2% from Japan and up 58.8% from South Korea. This likely reflected increased demand for electronic components used to produce final tech products.

Week of April 13, 2026

• What’s all the fuss about private credit?
• US inflation accelerates and consumer confidence plummets
• Chinese consumer prices unaffected by crisis, but producer prices accelerate
• COVID-19 continues to be disruptive

What’s all the fuss about private credit?

• A lot has been written about the staggering growth of private credit in the United States, with some observers suggesting that this market could pose a systemic risk to the financial system. Jamie Dimon, chief executive officer at JPMorgan Chase, said this week, “I do believe that when we have a credit cycle, which will happen one day, losses on all leveraged lending in general will be higher than expected, relative to the environment. This is because credit standards have been modestly weakening pretty much across the board."

What is private credit and how big is the market? The US Federal Reserve defines it as follows: “Private credit or private debt investments are debt-like, non–publicly traded instruments provided by nonbank entities, such as private credit funds or business development companies, to fund private businesses.” Private credit firms operate outside the traditional bank regulatory perimeter and generally not subjected to the capital requirements and disclosure requirements of banks. That alone creates risk, especially given there is less transparency than in the banking system. The market has been estimated to be in the range of US$1.4 trillion to US$1.8 trillion, partly depending on how private credit is defined. It was only US$46 billion in 2000 and US$1.0 trillion in 2023. Thus, it has grown extremely rapidly.

Private credit firms obtain their funding from investors such as pension funds, insurance companies, private equity firms, family offices, and sovereign wealth funds. However, they also leverage their capital by borrowing from banks, which is one reason some observers are concerned about risk. The Fed said that “borrowers have been willing to pay a premium for the speed and certainty of execution, agility, and customization that private lenders offer. Additionally, private debt funds have attracted highly leveraged borrowers that are unable to get adequate funding from heavily regulated banks.”

There is a long history of nonbank, or shadow-bank lending. Private credit is simply one more variation on this theme. The Financial Stability Board estimates that half of the world’s financial assets are held by nonbank financial intermediaries. Some of those involve staid organizations like pension funds, but many others are faster-growing lenders that have grown rapidly in recent years. In fact, in the past eight years, while bank lending in the United States grew roughly 25%, private credit lending has grown more than 130%.

Why did this market grow so quickly? After the global financial crisis between 2008 and 2010, laws were passed that tightened rules about capital buffers and lending standards.  This was done, in part, because the crisis had involved bank exposure to nonbank investment vehicles. Thus, after the crisis, nonbank lending declined as a share of the total. But over time, regulatory intrusion waned. Plus, as is often the case, investors and borrowers looked for ways to avoid regulation. Thus, there was an incentive for the development of new lending vehicles outside the banking system.

Is there a systemic risk to the financial system from private credit? First, consider what causes financial crises. As the Nobel laureate Paul Krugman puts it, crises of any kind usually develop because there is “a mismatch between liquid liabilities and illiquid assets.” That is, when confidence declines, bank depositors want their deposits back while banks struggle to raise the required funds. When dealing with nonbank situations, investors want their short-term loans back (which is what happened during the global financial crisis). When that happens, institutions face a cash crunch in which they attempt to sell assets that are falling in value, often leading to bankruptcy or worse.

Is this scenario applicable to private credit? It is hard to say. First, the private credit market as a share of gross domestic product is much smaller than the market for nonbank securities that was central to the global financial crisis in 2008. Second, private credit firms get much of their funding from investors, although a significant share of the  funding has come from bank loans. Third, some private credit firms have rules that enable them to limit redemptions for investors. These factors suggest that the risk to the system maybe lower in some ways than in 2008.

Moreover, a study by the Federal Reserve Bank of Boston said that “Private credit lenders’ reliance on banks for liquidity could pose systemic liquidity risk to the banking sector if a sufficient number of PC lenders draw down on their bank credit lines simultaneously in response to adverse aggregate shocks. However, because bank loans to private credit funds are typically secured and among those funds’ most senior liabilities, banks would suffer losses only in severely adverse economic conditions, such as a deep and protracted recession.” Thus, there is a risk of financial-market trouble, but only under very bad economic conditions. On the other hand, if the crisis in the Middle East persists and the price of oil rises much further, there could indeed be a significant economic crisis.

US inflation accelerates and consumer confidence plummets

• As expected, US inflation accelerated sharply in March, due in part to the rise in energy prices associated with the conflict in the Middle East. The US government reported that the consumer price index was up 3.3% from a year earlier—the biggest increase since May 2024. Prices were up 0.9% from the previous month—the biggest monthly increase since June 2022. The rise in prices from a year ago nearly completely offset wage gains recorded in March. This means that the rise in energy prices almost completely wiped out any gain in real (inflation-adjusted) purchasing power for workers. This is the so-called “stagflation” scenario, in which the energy-price shock generates higher inflation and reduced purchasing power in the economy. The latter could lead to slower economic growth.

One question now is whether this will cause consumers to cut back on non-energy spending or to dip further into their savings to maintain spending. In February, just prior to the events in the Middle East, consumer spending grew strongly despite a decline in disposable income. Thus, consumers significantly reduced their saving to sustain spending. And the lion’s share of the increase in spending went to automobiles. The surge in energy prices might have led to very different behavior in March and April.  We’ll have to wait to find out.

Meanwhile, when volatile food and energy prices are excluded, core prices remained relatively tame in March, indicating that the energy shock had not yet filtered through to non-energy prices in a significant way. If, however, energy prices remain elevated for a sustained period of time, it will likely lead to higher non-energy inflation. In March, core prices were up 2.6% in March versus a year earlier—up from 2.5% in February and the highest core inflation level since December. Core prices were up 0.2% from the previous month—the same as in February.

From a year earlier, energy prices were up 12.5% in March. This included an 18.9% increase in the price of gasoline and a 44.2% increase in the price of fuel oil, which is largely used for heating homes in cold climates. On the other hand, the price of electricity was up only 4.6%—the slowest increase since May 2025. The United States mostly uses domestically produced natural gas for electricity, the price of which has not been affected by events in the Middle East.

Investor reaction to the inflation news was muted. That is because the inflation report was not unexpected. Meanwhile, oil prices were elevated but stable, with investors awaiting news on a resolution of the impasse related to the intended ceasefire.

• US consumer sentiment hit a record low in April, according to the latest survey conducted by the University of Michigan. The index of consumer sentiment fell from 64.7 in February to 53.3 in March to 47.6 in April. The April figure was the lowest in the survey’s 74-year history, passing the previous low of 50 in June 2022 during the pandemic. The April survey was mostly completed by April 7, 2026, just prior to the announcement of a ceasefire in the Middle East. The survey found sentiment declining across the board, based on age, income, and political affiliation.

The survey also found that consumer expectations of inflation have surged.  Expectations for year-ahead inflation rose from 3.4% in February to 3.8% in March and 4.8% in April. This was the highest expectation since August 2025. However, it remains well below the recent peak of 6.6% in May 2025, when consumers were worried about the potential impact of the recently announced US tariffs.

Chinese consumer prices unaffected by crisis, but producer prices accelerate

• Unlike in the United States, where consumer price inflation accelerated in March due to the energy shock driven by the war in the Middle East, Chinese inflation remained tame, according to the latest report from the Chinese government. In part, this reflected the use of price regulations on the part of the Chinese government, which protected households from the energy shock. Moreover, China has a vast supply of crude reserves, thereby enabling it to avert a shortage of oil. On the other hand, Chinese producer prices accelerated, rising in March for the first time since 2022. Still, Chinese inflation has been so low in recent years that the economy can likely absorb the inflationary impact of the energy shock. Let’s look at the details:
  • In March, Chinese consumer prices were up 1% from a year earlier, down from 1.3% inflation in February. The March number was the second highest inflation level recorded since 2022. Yet, it was not the result of energy prices.  Rather, there had been a surge in food prices in February followed by nonfood and non-energy price increases in March. Notably, the consumer price index fell 0.7% from February to March. Meanwhile, when volatile food and energy prices are excluded, core prices were up 1.1% in March versus a year earlier.
  • Earlier this week, the Chinese government boosted the price that consumers pay for gasoline—the sixth increase this year. Yet, the increase was modest and did not fully reflect the impact of rising global oil prices. The increase was roughly half what it would have been if the full impact of the Middle East conflict was reflected in the prices. As such, the government helped to moderate the inflation that consumers face. Normally, keeping the price of gasoline below the market-clearing price would lead to a shortage. That is what happened in the United States in the 1970s. Yet, in the case of China today, a vast supply of reserves enables China to satisfy demand while keeping prices low.
  • On the other hand, the Chinese government reported that its producer price index was up 0.5% in March versus a year earlier. This was the first annual increase in the index since September 2022 and was driven by the sharp rise in global prices of oil and other commodities. China had been beset with four years of declining producer prices, in part reflecting excess capacity and weak domestic demand. The current rise in commodity prices doesn’t change that underlying fact. Thus, when the conflict in the Middle East ends and commodity prices revert to a lower level, it is likely that China will continue to face deflationary pressures.

COVID-19 continues to be disruptive

• It has been quite a long time since this update included a heading for COVID-19. We all thought that we were done with that sorry episode in history. Evidently, that is not the case. The Organisation for Economic Co-operation and Development (OECD) has released a report showing that there continues to be a significant economic cost stemming from long–COVID-19, which the OECD defines as “a post-acute infection syndrome characterized by persistent symptoms such as cognitive dysfunction (brain fog) and fatigue.”

The OECD estimates that, within its 38 member countries, about 75 million people have suffered from long–COVID-19. It estimates that, in the coming decade, the medical cost of treating these people will be at least US$11 billion per year. However, the OECD also says that the indirect costs will be far more substantial. Specifically, it says that “the indirect economic costs of long–COVID-19 are set to far outweigh the associated health care costs from 2025 to 2035. Long–COVID-19 is expected to continue to dent workforce participation and productivity at a time of modest economic growth and population aging. These losses are rooted in illness-related absenteeism, presenteeism, and people dropping out of the workforce.” In addition, it said that this will subtract up to 0.2% from annual GDP in the OECD economies and that the indirect costs could be around US$135 billion per year for the next decade.

While the OECD report points to the productivity and economic activity losses associated with long–COVID-19, it does not address the long-term impact on young people whose education was disrupted during the pandemic. We know that, following the worldwide influenza pandemic of the early 1920s, there was effectively a lost generation of young people who performed poorly in the education system and the job market. If history repeats itself, this could again be a problem in this decade, thereby further contributing to economic loss.

Week of April 06, 2026

• US job market and other economic data
• China’s economy shows resilience amid the crisis
• Eurozone inflation accelerates

US job market and other economic data

• The US government’s jobs report for March 2026 was stronger than expected, with payroll employment up by 178,000 from the previous month. Yet, one month does not make a trend: The March number was up only 260,000 from a year earlier. Employment has bounced around for many months. Although it increased sharply in March, it fell sharply in February—down 133,000 from the previous month. Thus, it is too early to know whether the strong job growth in March represents the start of a new trend. In any event, let’s look at the details:
  
  • The US government produces a monthly employment report based on two surveys: a survey of establishments and a survey of households. The survey of establishments found that, in March, nonfarm payroll employment was up 178,000 from the previous month. Still, payroll employment was up only 95,000 jobs since July of last year. Although March growth was very strong, there was no discernible positive trend over the last several months.
    
  • By industry, there were 26,000 new jobs in construction, 15,000 new jobs in manufacturing, and 21,000 new jobs in transportation and warehousing. At the same time, there was a loss of 15,000 jobs in financial services, only 2,000 new jobs in professional and business services, and a loss of 3,000 jobs in the information sector. The only industries with substantial job growth were health care and social assistance (up by 89,900 jobs) and leisure and hospitality (up by 44,000 jobs). Notably, employment in health care and social assistance was up 680,500 in the past 12 months, while overall employment was up only 260,000—which implies that, excluding health care and social assistance, employment fell by 420,500 jobs in the past 12 months.

Two questions arise: first, why was job growth so feeble in 2025? Second, why did it rebound strongly in March? As to the first question, there were several possible factors. Restrictive immigration policy likely drove the reduction in labor force growth. In addition, companies may have sought to offset the impact of tariffs by cutting costs, including labor costs. Regarding the second question, it cannot be easily answered. One month does not make a trend, and job growth has alternated between positive and negative for the past few months. Thus, for now, the data is consistent, with an underlying trend implying weakness in the job market.

Meanwhile, the establishment survey also provided data on wage growth in March. Average hourly earnings of all private sector workers were up 3.5% in March versus a year earlier—the slowest pace of earnings growth since May 2021. The deceleration of wage growth likely reflects weakening demand for labor. Still, wages are rising faster than prices, thereby providing workers with an increase in purchasing power.

Finally, the households survey, which includes measurement of self-employment, found that, in March, there was a sharp decline in labor-force participation. As a result, the participation rate fell. Moreover, the household survey reported an actual decline in employment. Yet, because this decline was smaller than the decline in the labor force, the unemployment rate fell from 4.4% in February to 4.3% in March. Overall, the household survey indicates job-market weakness.

The reaction of the financial market to the employment report was largely overshadowed by news from the Middle East. Crude oil prices of crude oil soared as investors worried about the potential duration and intensity of the conflict in the Middle East. Equity prices fell modestly, while bond yields saw modest increases.

• The start of the conflict in the Middle East appears to have had a negative impact on service industry activity in the United States, according to the latest purchasing manager’s index (PMI) from S&P Global. PMIs are forward-looking indicators meant to signal the direction of activity in the services sector. They are based on subindices such as output, new orders, export orders, employment, pricing, inventories, and sentiment. A reading above 50 indicates growing activity. The higher the number, the faster the growth.

The PMI for the US services industry fell from 51.7 in February to 49.8 in March—the first reading suggesting declining activity since January 2023. S&P Global commented that “the PMI survey data show the US economy buckling under the strain of rising prices and intensifying uncertainty, as the war in the Middle East exacerbates existing concerns regarding other policy decisions in recent months, notably with respect to tariffs.” It added that, with respect to the decline in services activity, “worst hit is consumer-facing service sectors where, barring the pandemic lockdowns, the downturn reported in March was among the steepest recorded since data were first available in 2009.”

Finally, it noted that “key to the deteriorating growth trend is a pull-back in spending amid worsening affordability, with costs and selling prices surging higher in March amid spiking energy prices. The survey data remains broadly consistent, with consumer price inflation accelerating close to 4%.” Consistent with that view, the Organisation for Economic Co-operation and Development has predicted that US inflation will hit 4% in 2026.

• The US government released data on retail sales in February. The results were fairly good, but this was prior to the start of the conflict in the Middle East. Given the surge in gasoline prices since the conflict began, it is likely that the data for March and April will look quite different. In any event, the government reported that, in February, retail sales were up 0.6% from January and were up 3.7% from a year earlier. On a monthly basis, sales were up 1.2% for automotive dealers, 2.3% for drugstores, 2% for clothing stores, 0.7% for non-store retailers, and up 0.9% for gas stations. The last number on the list will likely be much higher next month.

• The Conference Board reports that, in March, US consumer confidence increased slightly from February, despite the start of the conflict in the Middle East. However, consumer expectations for inflation increased notably.

Specifically, the overall confidence index increased from 91.0 in February to 91.8 in March—a modest gain. The present situation index increased by 4.6 points while the expectations index fell by 1.7 points. Thus, US consumers seem to be confident in their existing circumstances but worried about the future. The overall index reflects these two diverging indices. However, the overall index has been on a downward path for the last four years, reflecting high borrowing costs, high food prices, and concerns about US tariffs in the past year.

Interestingly, the survey found that the most optimistic cohort tended to be consumers under the age of 35 while the least optimistic tended to be those above 55. By income, only those consumers with incomes between US$25,000 and US$39,999 and those with incomes above US$125,000 were more optimistic. Everyone else was less optimistic. Finally, by politics, Republicans tended to be optimistic while independents and Democrats tended to be pessimistic.

Meanwhile, the survey also found that consumer expectations for inflation in the next 12 months increased sharply in March to the highest level since August 2025. Recall that, in August, consumers were worried about imminent tariff announcements. Now consumers are incorporating the Middle East situation into their expectations. In addition, an increasing share of consumers now anticipates higher interest rates while a decreasing share expects higher equity prices.

• The US government released its latest job openings and labor turnover survey for February 2026. The data indicates a further weakening of the US job market. The number of job openings fell by 5% from January to February, while the number of people hired fell 9.3% in the same period. The job opening rate (the share of available jobs that are not filled) fell to 4.2% in March—roughly similar to the levels seen in the past year.

By industry, the highest job opening rate was 5.3% in professional and business services, followed by 5.2% for accommodation and food services, and 5.1% for health care and social assistance. The latter two are industries that employ a large number of recent immigrants. The lowest job opening rates were in wholesale trade (2.3%), private education (2.3%), construction (2.4%), and real estate (2.6%).

China’s economy shows resilience amid the crisis

• China’s manufacturing activity grew in March: This was unexpected given the disruption from the Middle East. This is according to the government’s manufacturing PMI. The PMI is a forward-looking indicator meant to signal the direction of activity in the manufacturing industry. It is based on such subindices as output, new orders, export orders, employment, pricing, inventories, and sentiment. A reading above 50 indicates growing activity. The higher the number, the faster the growth.

The manufacturing PMI published by China’s National Bureau of Statistics increased from 49.0 in February to 50.4 in March. While relatively low and indicative of slow growth, it was a positive surprise in that some observers anticipated a negative impact from the conflict in the Middle East. Instead, activity rose modestly, and does not appear to be impeded by the rise in energy prices or the disruption of shipping routes from the Middle East. On the other hand, if the crisis continues, it could have a negative impact on the ability of Chinese manufacturers to produce their wares. Such disparate industries as food, semiconductors, automobiles, steel, and chemicals could be affected by the shortage of commodities and goods traversing the Strait of Hormuz.

• In recent weeks, we have seen a sharp increase in the yields on bonds issued by many major countries including the United States, those of Western Europe, and Japan. This likely reflected investor concern about rising inflation, potential tightening of monetary policy, and rising budget deficits. However, the one exception is China, where the yield on the 10-year bond has fallen modestly since the conflict in the Middle East began.

There are several reasons for China’s exceptionalism. First, China is far less dependent on imported oil than many other countries, although it does import a large volume from the Middle East. But it has substantial reserves of oil and substantial ability to shift electricity generation toward domestically mined coal. Plus, it uses a huge number of electric vehicles. Second, China has very low inflation. Thus, it can afford to absorb a bit more inflation without having to tighten monetary policy. In fact, it is possible that the central bank will choose to loosen monetary policy despite the crisis. Third, China’s budget deficit is relatively modest. Moreover, unlike some other countries, it is not likely that China will engage in fiscal measures to protect consumers from higher energy prices. Thus, the deficit is not likely to be affected by this crisis.

China’s very low borrowing costs reflect both a high level of domestic saving and increasing attractiveness of Chinese debt on the part of global investors. Meanwhile, many investors have shown wariness toward debt issued by the United States, European economies, and Japan. In each country, there is concern about rising inflation and about potential tightening of monetary policy. And, in each country, there is concern about fiscal probity.

Eurozone inflation accelerates

• In the 20-member eurozone, consumer price inflation surged in March, largely due to the sharp increase in energy prices following the start of the conflict in the Middle East.  Consumer prices were up 2.5% in March from a year earlier—the biggest increase since January 2025. Prices were up 1.2% from the previous month—the biggest gain since October 2022. Energy prices were up 4.9% in March versus a year earlier and were up 6.8% from the previous year.

When energy and food prices were excluded, core prices were up 2.3% in March versus a year earlier—lower than the 2.4% recorded in February and roughly unchanged for much of last year. Thus, underlying inflation has remained relatively stable. Yet, this could change in the months to come if energy prices remain elevated, thereby influencing the cost of producing other goods and services.

As such, investors are now expecting acceleration in core inflation, which in turn, would likely lead to a shift in monetary policy on the part of the European Central Bank (ECB).  In fact, the futures market is pricing a strong likelihood that the ECB will raise the benchmark interest rate one or two times before the end of 2026. ECB President Christine Lagarde recently said that, if inflation rises in the eurozone “significantly and persistently” above the ECB’s target, it might be necessary to raise the benchmark interest rate. On the other hand, if a rise in inflation is seen as temporary, and if there is risk to economic growth, the ECB could decide to leave rates unchanged.

Meanwhile, inflation varied by country. The European Commission reports that, in March, consumer prices were up from a year earlier by 2.8% in Germany, 1.9% in France, 1.5% in Italy, 3.3% in Spain, 2.6% in the Netherlands, and 2% in Belgium. For the ECB, this disparity creates a challenge for monetary policy decision-making.