Global manufacturing faces a rough start to 2025: S&P
Weak demand weighed heavily on the sector.
The first quarter of 2025 proved difficult for global manufacturing industries, the latest S&P Global Sector PMI data showed.
Manufacturing sectors across the board experienced weakness, whilst service-based industries managed to show relatively stronger performance, particularly in March.
The data was collected between March 12th and 27th, just before the US government announced new tariffs on the automotive industry and various country-specific import restrictions.
Although the implementation of these tariffs is on hold for 90 days, the business landscape remains highly uncertain. Understanding how different sectors perform globally and regionally helps identify which industries are most vulnerable and how resilient they may be under these changing conditions.
Weak demand
Heavy manufacturing, especially basic materials, continues to struggle. The Basic Materials sector, which includes chemicals, forestry, paper, and metals, has been among the worst performers since mid-2024. In March 2025, production declined across all three categories for the first time this year, with chemicals returning to contraction.
Metals and mining, in particular, have been consistently weak, ranking in the bottom four sectors since July 2024. New orders in this segment have mostly declined since May 2023, with only a slight increase in February 2024. As a result, companies have continued reducing their workforce for ten consecutive months.
However, the downturn in metals and mining was modest compared to the steep global decline in automobiles and auto parts production. Interestingly, European car manufacturers broke a long 21-month streak of declining production, managing to stabilise output in March. Yet, overall global output in the automotive sector saw its sharpest drop since November 2022, highlighting fragile demand even in Europe.
While the automotive industry remains one of the hardest hit sectors, other areas in consumer goods showed mixed results. Food and beverages production slipped slightly in March for the first time in 18 months, though the decline was minimal. On a more positive note, household and personal use products saw steady growth, with output rising at a pace stronger than the 2024 average. However, business confidence in this area fell sharply due to growing concerns over trade disruptions and a likely drop in investment.
Services' resilience
Unlike manufacturing, all services sectors monitored in March saw growth. The insurance industry led the way, regaining the top spot after a brief dip in February. The broader financial sector also expanded, although banks and real estate experienced slower growth compared to their performance over the past year.
Despite continued expansion, financial services underperformed relative to 2024 averages, especially in the banking and auxiliary financial activities sectors.
Confidence drops
Business sentiment weakened across much of the economy in March. Out of 21 sectors, 17 reported lower optimism about the year ahead, mostly due to political uncertainty, weak demand, and looming trade tensions. Eleven sectors were less optimistic than they had been in the previous survey.
With the effects of new tariff threats still unfolding, the true business impact is expected to appear in the April data, to be released in early May 2025. These results will give more insight into how global industries are adjusting to a more volatile and protectionist environment.
