U.S. business activity growth slowed to an 11-month low in March 2026 as businesses reported a slightly weaker upturn in new orders and a spike in prices following the outbreak of tensions in the Middle East.
In the latest U.S. Flash PMI, S&P Global noted that the service sector was harder hit as manufacturers reported an upturn in output and new order book growth. A similar divergence was also seen regarding output expectations, with a weaker outlook among service providers contrasting with a more upbeat perspective among manufacturers, the latter buoyed in part by fewer tariff-related worries.
However, overall private sector confidence declined and contributed to the first fall in employment for over a year.
U.S. PMI Composite Output Index falls to 51.4 in March
The headline flash S&P Global U.S. PMI Composite Output Index fell from 51.9 in February to 51.4 in March, the lowest level since April of last year. Although above the 50 no-change level to signal an ongoing expansion of output, the March reading pointed to a slowing in the rate of growth of U.S. business activity for a second successive month to round off the economy’s weakest quarter since the fourth quarter of 2023.
“The flash PMI survey data for March signal an unwelcome combination of slower growth and rising inflation following the outbreak of war in the Middle East. Companies are reporting a hit to demand from the additional uncertainty and cost-of-living impact generated by the conflict. Travel, transport, and tourism-related issues are compounded by financial market jitters and affordability constraints, notably including concern over the impact of higher interest rates, surging energy prices, and supply chain delays,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
The slowdown in U.S. business activity was led by the service sector, where business activity grew at the weakest pace for 11 months amid a weaker gain in new work, the latter driven by a steepening rate of loss of export sales. Slower growth and falling orders, especially in terms of exports, were commonly blamed on subdued confidence among both consumer and business customers.
“There was better news from manufacturing, where output growth accelerated slightly as new orders rose at their fastest rate for five months. Export orders stabilized after eight months of decline. Panelists indicated some softening of the tariff impact on order books, as well as instances of purchasing safety stocks, with factories and their customers keen to secure prices and ensure supply availability,” added the report.
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U.S. Manufacturing PMI rises to 52.4 in March
The S&P Global U.S. Manufacturing PMI rose from 51.6 in February to 52.4 in March, according to the flash reading, signaling an improvement in factory business conditions for an eighth successive month.
Production growth accelerated slightly as new orders showed the largest rise since last October. Input inventories also contributed positively, rising again after falling for the first time in seven months in February as factories sought to ensure the supply of inputs amid delivery worries.
Supplier delivery times lengthened to a degree not witnessed since October 2022, further boosting the PMI. The only drag on the PMI came from employment, which rose at its weakest rate for eight months.
“The PMI data are indicative of GDP rising at an annualized rate of just 1.0 percent, with a modest 1.3 percent expansion signaled for the first quarter as a whole. The survey’s price gauges, meanwhile, point to consumer price inflation accelerating back to around 4 percent, hinting at a growing risk of the U.S. moving into an environment of stagflation. The Fed will therefore need juggle these intensifying upside risks to inflation against the growing risk of the economy losing growth momentum, with much depending on the duration of the war and its impact on energy prices and global supply chains,” added Williamson.
