25-Mar-2025 08:05

US business activity growth picked up momentum in March, according to flash PMI survey data, as a marked upturn in the service sector offset a renewed fall in manufacturing output.

However, business expectations for the year ahead fell to their second lowest since October 2022 as companies grew increasingly cautious about the economic outlook, often citing worries over customer demand and the impact of aspects of the new administration's policies.

Jobs growth was also subdued amid heightened uncertainty about the outlook and concerns over rising costs. Input price inflation accelerated sharply, especially in manufacturing, to a near two-year high, often attributed to the impact of tariff policies.

However, competition limited the pass-through of higher costs to selling prices.

The headline S&P Global US PMI Composite Output Index rose nearly two points in March, up from 51.6 in February to hit a three-month high of 53.5, according to the preliminary 'flash' reading.

The improvement was driven by the services economy, where output growth picked up momentum for the first time this year, having slumped to a 15-month low during February.

The resulting rise in service sector output was the largest recorded so far this year, with companies reporting improved new business inflows amid some signs of strengthening customer demand and better weather compared to earlier in the year.

Services exports acted as a drag on activity, however, declining for a third successive month. Manufacturing output meanwhile fell into decline, contrasting sharply with the gains seen in the first two months of the year (February's rise in output was the largest recorded since May 2022).

Factories reported fewer instances of output having been buoyed by the front-running of tariffs, and new orders growth came close to stalling in the goods-producing sector. Input buying in the sector also fell back into decline.

The S&P Global Flash US Manufacturing PMI fell from 52.7 in February to 49.8, dropping below the 50.0 no change level to signal the first ' albeit marginal ' deterioration in business conditions within the goods producing sector since December.

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