U.S. Services Sector Contracts for the First Time in Three Years

On April 3, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that PMI survey data indicates the U.S. economy is under pressure from rising prices and increasing uncertainty, exacerbated by the Middle East conflict, which has heightened concerns over recent policy decisions. The services sector has contracted for the first time since January 2023, dragging the overall economy down to an annualized growth rate of only 0.5% in March, a near-stagnation level. The consumer-facing services industry has been the most severely affected, with the decline in March being one of the largest since data collection began in 2009, aside from the pandemic lockdown period. The financial services and technology sectors, which performed strongly last year, are showing signs of weakening due to volatility in financial markets and concerns over rising interest rates. The key factor behind the deteriorating economic growth is a decline in spending, attributed to decreasing purchasing power, while soaring energy prices in March have significantly increased costs and sales prices. Survey data shows that businesses are increasingly willing to pass costs onto customers in the coming months, which could accelerate consumer price inflation to nearly 4%.