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Manufacturing activity in the US gained momentum in March, but the outlook is clouded by rising inflationary pressures, driven by geopolitical tensions and ongoing tariff-related costs. In China, industrial and manufacturing output growth strengthened, and it experienced the fastest expansion in foreign trade for several years. Meanwhile, the Organisation for Economic Co‑operation and Development (OECD) revised down its forecast for UK economic growth in 2025 ‒ the largest downgrade among major economies. South Africa’s economy grew in the fourth quarter of 2025, extending its streak of consecutive quarterly expansions and underscoring its resilience despite a challenging global environment.

US manufacturing growth accelerates in March

US manufacturing showed increased momentum in March, as gains in production and new orders helped to underpin a healthy expansion, according to the latest S&P Global figures. The outlook is uncertain due to mounting inflationary pressures stemming from geopolitical risks and persistent tariff-related costs. The S&P Global US Manufacturing Purchasing Managers’ Index (PMI) climbed to 52.3 in March from 51.6 in February, extending its run to eight straight months above the 50.0 level that indicates growth.

 

Source: S&P Global (Data collected 12-26 March 2026)

The survey showed broad-based improvement in the manufacturing sector, with production and new orders rising at robust rates. Growth was mainly fuelled by domestic demand, while export orders continued to fall as a result of the impact of tariffs and ongoing shipping disruptions. Despite the firmer expansion, cost pressures escalated in March. Input costs increased at their fastest rate since August 2025, reflecting higher energy prices and sustained tariffs on essential inputs such as steel and aluminum. Supply chain conditions also worsened, as supplier delivery times extended to their longest since October 2022. Manufacturers attributed these delays to transport interruptions and wider logistical difficulties tied to the Middle East conflict. In response, firms raised their selling prices at the fastest pace in seven months, seeking to offset rising costs.

Overall business sentiment was positive, supported by intentions to boost capital spending and investment in research and development. However, optimism eased slightly from February levels, as elevated energy costs, tariffs and geopolitical risks tempered expectations. While companies generally anticipate only a limited and temporary impact from the conflict, rising costs and supply bottlenecks are clouding the outlook. Companies are concerned that prolonged pressures could begin to dampen demand, hiring and output in the months ahead.

China’s economy begins year on strong footing

China’s economy has started 2026 on a strong footing, with a range of major indicators gaining momentum after the late‑2025 slowdown. Growth in industrial and manufacturing output accelerated, while foreign trade recorded its fastest monthly expansion in several years. High‑tech industries were again a key engine of growth, highlighting China’s ongoing efforts to move further up the value chain.

However, subdued domestic demand and falling private and foreign investment suggests lingering caution in parts of the economy. Although policymakers have signalled that supportive measures will remain in place in 2026, there is lingering uncertainty whether the early strength can be maintained, particularly as the broader effects of global trade frictions have yet to fully emerge in the data.

Monthly growth in manufacturing value add (percentage change y/y)

Source: China National Bureau of Statistics

China’s official manufacturing PMI pointed to a more subdued trajectory in March, as it fell by an additional 0.3 percentage points between January and February to 49.0. Although the deeper contraction may partly reflect disruptions from the Lunar New Year holiday, it also extends a broader period of weakness in manufacturing that has persisted since early 2025. The single exception was a brief uptick in December 2025, when the PMI edged up to 50.1. In contrast, several core manufacturing segments ‒ especially electronics ‒ have entered the new year with strong momentum. Value added in electronics manufacturing surged 14.2% year-on-year (y/y) in the first two months of the year, underscoring resilient activity and firm demand in the sector.

Consumer spending, as reflected in retail sales, improved in the first two months of the year, supported by spending linked to the Lunar New Year holiday. Total retail sales amounted to RMB 8.61 trillion (US$1.25 trillion), representing a 2.8% increase compared with the same period in 2025 and an acceleration of 1.9 percentage points from December. Even so, much of this uplift appears seasonal, and the gain points to only a limited rebound that may prove difficult to sustain in the months ahead.

UK economy limped into the end of last year before Iran war

UK gross domestic product grew by 0.1% in the October–December period, according to the Office for National Statistics (ONS). Economists surveyed by Reuters expected no revision to the initial fourth‑quarter estimate. The ONS also confirmed that growth in the third quarter was 0.1%. In this period, UK households increased their savings, with the savings ratio rising by 0.8 percentage points to 9.9%.

The OECD lowered its projection for UK economic growth this year to 0.7% from a previous estimate of 1.2%, the sharpest downgrade among major economies. This would mark a significant slowdown from 2025, when growth was revised up by the ONS to 1.4% from an earlier estimate of 1.3%.

UK Prime Minister Keir Starmer and Finance Minister Rachel Reeves have pledged to accelerate economic growth, a task made more difficult by the ongoing conflict in the Middle East. Revised ONS figures showed that the economy in the fourth quarter was 1.0% larger than a year earlier, unchanged from the initial estimate, while output per person fell 0.1% year on year. Meanwhile, Britain’s current account deficit narrowed to £18.4 billion (US$24.29 billion) in the three months to December, below the Reuters poll forecast of £23.4 billion. The deficit equated to 2.4% of GDP, widening from 1.4% in the third quarter.

For your interest

  1. The US adds jobs in March, exceeding expectations
  • The US Labor Department reported that employers added 178 000 jobs in March. That figure was well above the expectations of economists polled by LSEG, who predicted a gain of 60 000 jobs.
  • Revisions were made to the payroll numbers for the prior two months, with January’s report revised up by 34 000 jobs from a gain of 126 000 to 160 000; while February’s report was revised down by 41 000 jobs from a loss of 92 000 to 133 000.

(Source: Fox Business, March 2026)

  1. Stagflation alarm bells ring in the Eurozone
  • The closely-watched S&P Global flash purchasing managers’ index (PMI) for the Eurozone fell to 50.5 in March, marking a steep decline from the 51.9 reported in February. Economists polled by Reuters expected a shallower dip to 51.0. The 50.0 threshold separates expansion from contraction territory.
  • Private sector output in the Eurozone sank to a 10-month low in March, amid mounting evidence of the impact of the Iran conflict on the global economy. The readings prompted fresh warnings that the region is facing the spectre of looming stagflation ‒ a toxic combination of high inflation and unemployment, and stalling growth.

(Source: CNBC, March 2026)

  1. Japan’s economy shows resilience
  • The Japanese economy has displayed impressive resilience in the face of global shocks and output is growing above potential. Domestic demand has been robust and unemployment remains low.
  • After three decades of near-zero inflation, prices grew faster than the Bank of Japan’s target for over three and a half years before moderating in January. While nominal wages are rising at a historic pace, there are persistent concerns about the cost of living, as high inflation is eroding household purchasing power.

(Source: International Monetary Fund, March 2026)

  1. The SARB kept interest rates unchanged in March
  • The South African Reserve Bank (SARB) unsurprisingly held its key repo rate at 6.75% on 26 March, marking a second consecutive pause. It cited upside risks to the inflation outlook due to the ongoing Middle East conflict.
  • Policymakers noted that inflation was moving in a positive direction, matching the 3% target in February, but higher energy prices are expected to push inflation higher in the near term. Headline inflation is projected to rise to around 4% in the second quarter, led by fuel inflation at above 18%, before gradually easing back to 3% by late next year under the baseline forecast.

(Source: Trading Economics, March 2026)

SA’s economy shows continued growth in Q4 2025

According to Statistics South Africa, the country’s economy expanded by 1.1% in 2025, with GDP increasing by 0.4% in the fourth quarter. The fourth-quarter performance represents the fifth consecutive quarter of economic growth, highlighting the economy’s ongoing resilience amid an increasingly difficult global climate. The stronger performance towards the end of the year to helped raise overall annual GDP growth to 1.1% in 2025, the highest rate recorded since 2022, when the economy grew by 2.1%.

From a production perspective, growth in the fourth quarter was largely driven by major service-oriented sectors such as finance, real estate and business services; trade, catering and accommodation; and personal services. Agriculture and general government services also made positive contributions. On the expenditure side, economic activity was supported by increased household consumption, rising gross fixed capital formation, and higher government spending, all of which contributed to the favourable quarterly outcome.

The government attributes sustained economic momentum to reforms implemented by Operation Vulindlela and strengthened Public-Private Partnerships. Government has reaffirmed its commitment to working with all stakeholders to accelerate inclusive growth, promote investment, and build a resilient economy that supports sustainable development and job creation.

Market overview

Global overview

Global equities recorded their worst month in over three years in March, with the MSCI World Index ending at -6.37% month-on-month (m/m) in US dollar terms, as US and Israeli military strikes on Iran impacted investor confidence. Iran’s military responded to the strikes by refusing passage for vessels through the Strait of Hormuz, driving a spike in oil prices. Emerging markets (EMs), which have previously outperformed their developed market (DM) peers, were a significant underperformer in March, with the MSCI EM Index ending at -13.03% m/m in US dollars. The FTSE 100 ended the month in negative territory at -6.68% m/m from February’s 6.47% m/m gains in pound sterling terms. The S&P 500’s losses continued into March at -4.98% m/m from February’s -0.76% m/m losses, both in US dollars. Global bonds ended the month in negative territory at -3.07% m/m from February’s 1.12% m/m gains in US dollars. Global property significantly underperformed in March, ending at -9.00% m/m from February’s 7.01% m/m gains in US dollars. The Euro Stoxx 50 Index underperformed for the month at -9.14% m/m from February’s 3.34% m/m gains in euros. The Dow Jones Index also ended the month in negative territory at -5.20% m/m from February’s 0.31% m/m gains in US dollars. From being the biggest gainer in February at 10.42% m/m, the Nikkei was one of the biggest underperformers for March at -12.68% m/m in yen terms.

Local overview

The South African equity market’s recent streak as a top-performing global bourse ended abruptly in March when the FTSE/JSE All Share Index ended in negative territory at
-10.45% m/m in rand terms. A rally by domestic equities on the last day of March saved the local bourse from delivering its worst monthly drawdown since the 2008 global financial crisis. Precious metal miners, the driving force of the previous outperformance, were the biggest detractors in March. Resources significantly underperformed in March at -15.24% m/m from February’s 13.32% m/m gains. Both Property and Financials underperformed in March, at -11.41% m/m and -9.65% m/m respectively, from February’s gains of 6.29% m/m and 7.32% m/m respectively, in rand terms. The Industrials sector was in negative territory at -6.55% m/m from February’s positive 6.56% m/m. Cash was positive for the month, at 0.56% m/m from February’s 0.51% m/m gains in rand terms, but it underperformed by -6.49% m/m in US dollar terms. Local bonds were another casualty of the March sell-off, with the FTSE/JSE All Bond Index ending the month negatively at -6.83% m/m in rand terms. Bonds of 1-3 years were negative at -0.69% m/m, along with bonds of 3-7 years at -3.94% m/m. Bonds of 7-12 years were also negative at -6.62 m/m, and bonds of 12 years and above were negative at -9.27% m/m. The rand was the worst-performing major currency in March, weakening by -7.01% m/m against the US dollar, by -4.71% m/m against the euro, and by -5.19% m/m against the British pound.

 

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