Patience is Not Policy

Financial markets continue to behave as though the most difficult phase of the current disruption may soon pass. Equity indices remain broadly supported, volatility has eased from recent highs, and expectations for eventual monetary easing remain embedded in pricing despite an increasingly complicated macro backdrop.

That optimism may prove premature.

The core issue is not that economic conditions have materially improved, but that many of the data points required to assess the full impact of the current disruption do not yet exist. Supply-side shocks of this nature rarely transmit immediately. Inventory buffers, procurement adjustments, insurance repricing and delayed cost pass-through all create lags between the initial disruption and its broader economic effects. Markets may therefore be drawing conclusions before the underlying data is sufficiently mature to support them.

Resilience Is Holding, But Not Evenly

Recent flash PMI data across major economies reinforces the view that global activity remains resilient, though increasingly uneven beneath the surface.

In the United States, the S&P Global Composite PMI rose to 52.0 in April, supported by stronger manufacturing activity and a return to modest services growth. Yet much of that manufacturing strength appears to have been driven by precautionary inventory-building, as firms moved to secure inputs ahead of anticipated shortages and higher prices. New business growth slowed to its weakest pace in two years, while supply delays worsened and selling prices rose at their fastest monthly pace since mid-2022. 

The United Kingdom recorded a similar improvement, with composite activity also rising to 52.0. Manufacturing and services both expanded, but businesses reported mounting cost pressures and evidence of front-loading behaviour linked to supply and pricing concerns. 

By contrast, the eurozone moved into contraction. Composite PMI fell to 48.6 in April, with services activity weakening sharply as higher energy costs weighed on demand, particularly in Germany. While manufacturing remained in expansion, the broader picture points to a region feeling the effects of energy disruption more acutely than its peers. 

Japan and Australia offered further evidence of divergence. Japan remained in expansion, supported by the strongest rise in manufacturing output since 2014, though business confidence fell sharply amid geopolitical uncertainty and rising input costs. Australia returned to marginal growth after March’s contraction, but sentiment deteriorated and price pressures accelerated further. 

Taken together, the picture is not one of broad economic weakness, but of increasingly fragmented growth, where resilience remains visible at the headline level even as underlying conditions become less uniform.

The Pressure Is Reaching the Real Economy 

The effects of the disruption are becoming more visible across parts of Asia’s real economy.

Thailand’s Siam Cement has announced a temporary suspension of its Vietnam petrochemical complex as prolonged disruption to the Strait of Hormuz tightens feedstock supply and raises costs. Malaysian manufacturer Karex has indicated it may raise prices by as much as 30 percent if supply disruptions persist, citing higher costs for oil-derived raw materials. In Singapore, selected coffee shop operators have also announced beverage price increases in response to rising shipping, utility and raw-material costs. 

These examples matter because they show that cost pressures are no longer confined to upstream commodity markets or business surveys. They are beginning to affect industrial production decisions and consumer-facing pricing across the region.

Prices Are Starting to Catch Up

The more consistent signal across regions is inflation.

Input-cost inflation accelerated across nearly all major developed economies in April, driven by higher fuel, energy, shipping and raw-material costs. Output prices also rose more quickly, indicating that businesses are beginning to pass these pressures through rather than absorb them internally. 

Singapore is beginning to reflect the same dynamic. Headline CPI rose to 1.8 percent year-on-year in March, the highest since September 2024, while core inflation increased to 1.7 percent. The initial pickup was driven primarily by transport-related inflation, particularly higher petrol prices, though the Monetary Authority of Singapore has indicated that imported cost pressures are expected to broaden further over time. 

Importantly, many second-round effects may not yet be visible. Businesses often absorb higher costs initially before adjusting prices more fully over time. Electricity and gas tariff increases scheduled for the coming quarters suggest that further pass-through may still lie ahead.

Policy Has Little Room for Error

This creates a difficult backdrop for policymakers. 

Major central banks, including the US Federal Reserve, European Central Bank, Bank of England and Bank of Japan, are expected to remain on hold in the coming weeks. That should not be mistaken for policy comfort. 

The challenge facing policymakers is increasingly one of constraint. Slower growth would ordinarily strengthen the case for easing. Rising inflation, particularly when driven by supply-side disruptions, argues for caution. Central banks are therefore being forced into a more patient posture, not because risks have diminished, but because the trade-offs have become more difficult.

This matters for markets. Monetary easing may eventually come, but policy support cannot resolve the underlying drivers of the current disruption. Rate cuts do not reopen shipping lanes, restore supply chains, or reduce geopolitical risk premia embedded in energy markets.

Singapore Is Holding, For Now

Domestically, the impact remains measured but increasingly visible.

Inflation is moving higher, selected consumer-facing businesses have begun raising prices, and the Monetary Authority of Singapore has maintained its 2026 inflation forecast range at 1.5 to 2.5 percent, with risks still tilted to the upside. 

At the same time, domestic asset markets remain firm. Private residential property prices rose 0.9 percent quarter-on-quarter in the first quarter of 2026, supported by continued strength in non-landed homes across most regions. The resilience of the property market suggests that while inflation pressures are building, they have not yet translated into a broader deterioration in household confidence or asset demand.

This reinforces the broader point. Singapore remains stable, but the effects of the disruption are becoming more visible at the margins, even if they have yet to materially weaken broader domestic conditions.

Conclusion

The current environment is not defined by immediate economic deterioration, but by the growing gap between what markets appear to expect and what the available data can yet confirm.

Growth has held up better than many anticipated, but the underlying composition of that resilience is becoming more uneven. Price pressures are broadening, regional divergence is increasing, and policymakers remain constrained in how they can respond.

Patience, in this context, is not pessimism. It is recognition that the most consequential effects of this cycle may still lie ahead.