The Confidence Gap

Recent economic data continues to suggest that the global economy remains on relatively firm footing. Manufacturing activity strengthened further in April, labour markets across major economies have stayed resilient, and businesses in several sectors continue to expand despite geopolitical tensions and elevated energy prices.

That has helped sustain a degree of confidence across financial markets and corporate activity alike. 

The underlying picture, however, is becoming more layered. The areas of the economy still demonstrating momentum are no longer as broad-based as they once were. Investment-linked sectors, technology demand and export activity continue to provide support, while consumer-facing industries in several markets are beginning to encounter a more difficult operating environment. 

The gap between those two realities is becoming increasingly visible. 

Businesses Continue to Prepare for Disruption

Global manufacturing activity expanded at a faster pace in April, with the S&P Global Manufacturing PMI rising to 53.4, close to a five-year high. New orders improved, business optimism stabilised, and production activity remained firm across several major economies.   

Part of that resilience reflects companies continuing to prepare for future disruption rather than stepping back from it. Businesses across multiple markets have accelerated inventory accumulation and stockpiling amid concerns over rising transport, energy and raw-material costs linked to the conflict in the Middle East and continued restrictions around the Strait of Hormuz. Input-cost inflation rose to a 41-month high in April, while selling prices increased at the fastest pace since October 2022.  

China’s latest trade data points to similar behaviour. Exports rose 14.1 percent year-on-year in April to a record US$359.4 billion, supported by continued demand from Southeast Asia and Europe, alongside efforts by companies to secure supply ahead of further uncertainty.  

Taken together, the data suggests that corporate activity remains active, though increasingly shaped by caution and preparation rather than outright optimism. 

Technology Continues to Carry More of the Load 

One of the clearest areas of resilience remains technology-related manufacturing and investment activity. 

Demand linked to semiconductors and digital infrastructure continues to support industrial production and export activity across several economies. In Singapore, the technology-focused PMI recently reached an eight-year high, while electronics-related production remains a significant contributor to manufacturing output.  

This continues to provide an important buffer for broader economic activity at a time when more cyclical and consumer-sensitive sectors are beginning to soften. 

The concentration of that strength, however, also matters. A growing share of current momentum is now being driven by sectors tied to technology, infrastructure and investment spending, rather than by broad-based expansion across the wider economy. 

Singapore Reflects the Same Divide  

Singapore’s latest data reflects many of the same crosscurrents emerging globally.  

On the surface, activity remains relatively healthy. Retail sales rose 4.0 percent year-on-year in the first quarter, visitor arrivals continued to increase, and tourism receipts are projected to remain near record levels. Authorities are also pressing ahead with longer-term tourism expansion plans, including new cruise and waterfront developments, despite the more uncertain external backdrop.  

Manufacturing activity has also remained in expansion, supported by electronics and semiconductor-related production tied to ongoing technology and infrastructure demand. The stronger Singapore dollar has similarly supported outbound travel, with residents continuing to spend on overseas holidays and discretionary purchases abroad.  

Pressure is becoming more visible in parts of the economy more directly exposed to everyday consumer spending. 

Food-and-beverage closures rose sharply in the first quarter, particularly among restaurants and cafés, while net industry growth slowed significantly. Restaurant takings increased only modestly despite higher menu prices, and inflation-adjusted restaurant sales declined for a twelfth consecutive quarter.  

This paints a more nuanced picture of domestic conditions. Tourism, investment activity and higher-end discretionary spending remain reasonably supportive, while more price-sensitive segments of the consumer economy are becoming increasingly challenging for businesses to navigate. 

The Trade-Offs Are Becoming Harder to Ignore

The broader macroeconomic backdrop continues to leave policymakers with limited flexibility. 

The US labour market remained relatively firm in April, with payroll growth exceeding expectations and unemployment holding steady at 4.3 percent. At the same time, inflation pressures tied to energy, logistics and tariffs continue to build across multiple economies. 

This leaves central banks confronting a more complicated environment than headline growth figures alone might suggest. Parts of the economy continue to expand at a healthy pace, while more consumer-sensitive sectors are beginning to slow under the weight of higher costs and weaker demand conditions. 

Lowering rates too early risks reinforcing inflation pressures. Holding policy tight for too long risks placing additional strain on weaker parts of the economy. 

That balance is becoming progressively more difficult to manage. 

Conclusion 

The broader message from the latest data is not one of imminent economic deterioration. Manufacturing activity remains supportive, labour markets continue to hold up, and investment-linked sectors are still providing momentum to the global economy. 

What is changing is the distribution of confidence. 

Businesses continue to invest and prepare for growth, while consumers are becoming more selective in how they spend. The result is an economy that continues to move forward, though with a widening divide between sectors benefiting from investment and those more exposed to rising costs and everyday demand pressures.

For markets, that distinction may matter more in the months ahead than the headline growth numbers alone.