WASHINGTON: U.S. business activity slowed to an 11 month low in March as higher energy costs and broader supply strains linked to the Middle East conflict weighed on demand, while price pressures intensified across the private sector. Flash survey data from S&P Global showed its U.S. Composite PMI Output Index fell to 51.4 in March from 51.9 in February, marking the weakest reading since April 2025. A reading above 50 still signals expansion, but the latest figure pointed to a second straight month of softer growth in both output and new orders.
The slowdown was centered in the much larger services sector, where the flash business activity index slipped to 51.1 from 51.7 in February, also the weakest level in 11 months. S&P Global said weaker demand, falling export sales and increased caution among consumers and business clients contributed to the pullback. The firm also said geopolitical uncertainty and lingering concerns tied to federal spending were prompting some customers to delay projects and orders, adding to the loss of momentum at the end of the first quarter.
Manufacturing offered a partial offset. The flash manufacturing PMI rose to 52.4 in March from 51.6 in February, with factories reporting faster output growth and the strongest increase in new orders in five months. S&P Global said export orders stabilized after eight months of decline, while some producers and customers built safety stocks and moved to secure supply at lower prices. Even so, the broader survey signaled the weakest quarter for overall output since the fourth quarter of 2023 and was consistent with annualized GDP growth of about 1.0% in March and 1.3% for the quarter as a whole.
Inflation pressures intensify
Cost pressures strengthened sharply during the month as businesses reported higher fuel, transport and other input expenses. S&P Global’s input price index jumped to 63.2 from 60.0 in February, while its output price gauge, which tracks prices charged to customers, climbed to 58.9 from 56.9. The survey said supply delays became more common, especially in manufacturing, with shipping disruptions linked to the conflict contributing to longer delivery times. S&P Global said the price measures were consistent with consumer inflation accelerating back toward 4%.
The survey also showed hiring weakened. S&P Global’s measure of private sector employment fell to 49.7 in March from 50.4 in February, the first contraction in 13 months, as service providers cut staffing and companies sought to reduce overheads in an uncertain operating environment. Manufacturing payrolls still rose, but at the slowest pace in eight months. The latest employment reading added to evidence that firms are becoming more cautious even as overall activity remains in expansion territory and labor market conditions outside the survey have appeared comparatively stable.
Fed faces slower growth and higher prices
The March PMI figures landed less than a week after the Federal Reserve left its benchmark interest rate unchanged at 3.5% to 3.75%, saying inflation remained somewhat elevated and that uncertainty around the economic outlook was still high. The central bank also said developments in the Middle East posed uncertain implications for the U.S. economy. The fresh survey data reinforced that challenge by combining slower growth with firmer inflation pressures, a mix that complicates the policy backdrop as officials weigh risks to both employment and price stability.
Business expectations for the year ahead edged lower in March, with service providers reporting their weakest outlook since October as higher energy prices, travel disruptions and financial market worries clouded demand. Manufacturers were somewhat more upbeat, helped by reduced concern over tariffs and hopes for firmer domestic demand. Even with that divide, the survey painted a picture of an economy still growing but losing speed as costs rise and confidence softens. Those conditions left March with the weakest composite reading in nearly a year and a sharper warning that inflation and growth pressures are again moving in the wrong direction. – By Content Syndication Services.