FX.co ★ US Business Activity Slips on Inflation, Middle East War

The S&P Global US Services PMI fell to 49.8 in March 2026 from 51.7 in February, revised down from the preliminary estimate of 51.1. This reading signals the first contraction in the services sector in more than three years. The downturn reflected the weakest growth in new business since April 2024, as firms reported reduced client confidence and softer demand, partly attributed to the effects of the Middle East conflict.

Export activity deteriorated further, with tariffs and geopolitical tensions weighing on trade. Business sentiment slipped to a five-month low as rising energy costs heightened concerns about inflation and consumer spending. Employment declined marginally for the first time since December, indicating increased caution among firms.

Input cost inflation accelerated to its highest level this year, largely driven by higher energy prices. Companies continued to pass these cost increases on to customers, pushing selling price inflation to an eight-month high.