U.S. services sector fell into contraction for the first time in three years, with the annualized growth rate for March dropping to 0.5%

Gate News message, April 3, S&P Global Market Intelligence Chief Business Economist Chris Williamson said that PMI (Purchasing Managers’ Index, a key measure of economic activity) survey data shows the U.S. economy is facing mounting pressure from rising prices and increased uncertainty, and the Middle East war has further heightened concerns about other recent policy decisions. The services sector fell into contraction for the first time since January 2023, dragging the overall economy to an almost stagnant level, with the March annualized growth rate at only 0.5%. The hardest hit is consumer-facing services; aside from the period during COVID-19 lockdowns, the March decline was one of the largest since relevant data began in 2009. Financial services and technology sectors, which performed strongly last year, showed signs of weakening under the impact of concerns about volatility in financial markets and rising interest rates. The key driver of worsening economic growth is a drop in spending, caused by declining purchasing power, while a surge in energy prices in March pushed costs and sales prices up sharply. Survey data shows that businesses’ willingness to pass costs on to customers over the coming months is increasing, and consumer price inflation could accelerate to nearly 4%.