US economic activity accelerated at the end of Q1, led by strong rebound in the services sector. PMI Services surged from 51.0 to 54.3 in March, lifting Composite PMI from 51.6 to 53.5. However, the picture was not universally upbeat, with the Manufacturing PMI slipping back into contraction territory at 49.8, down from 52.7.
Chief Business Economist Chris Williamson noted that the data suggest annualized growth of 1.9% in March, but only 1.5% for the quarter—marking a slowdown from Q4 2024.
Williamson added that near-term risks also seem “tilted to the downside”. Much of the services rebound may prove short-lived. Manufacturing’s decline highlights the waning benefit from earlier “front-running of tariffs”. Business confidence fell to one of the lowest levels in the past three years, with anxious over the fallout from the Trump administration’s “Federal spending cuts and tariffs.”
Tariff-related inflation pressures are beginning to show. Input costs are now rising at the fastest pace in nearly two years Manufacturers, in turn, are increasingly raising prices to protect margins. Though, services inflation remains relatively tame—thanks to soft demand and competitive pricing.
