U.S. Business Activity in March Fell Close to a One-Year Low—Companies Report Weakening Demand

Business activity growth in the United States slowed in March to near its lowest level in the past year, while input costs for raw materials and other resources accelerated amid the war waged by the United States and Israel against Iran.

The S&P Global composite index for March, according to preliminary data, fell by 0.5 points to 51.4, data released Tuesday showed. Readings above 50 indicate expansion. The gauge of input prices rose by more than 3 points, reaching its highest level since May.

The weakening of the overall indicator was driven by the slowest growth in the services sector in nearly a year. Input costs in services climbed to their highest level since May, while for manufacturers they reached the highest level in seven months.

“Companies report weakening demand amid heightened uncertainty and pressure on living standards caused by the conflict,” said Chris Williamson, chief economist at S&P Global Market Intelligence.

According to him, strains in travel, transport, and tourism are being exacerbated by volatility in financial markets and constrained spending capacity—including against a backdrop of rising interest rates, sharply higher energy costs, and supply chain disruptions.

In March, employment declined for the first time in a year, reflecting reduced hiring in the services sector. Growth in new orders was little changed and remains below the pace seen for much of last year.

At the same time, the U.S. manufacturing sector is showing signs of stabilization. Order growth reached its highest level since October, and output edged higher. Manufacturers’ expectations for production climbed to their highest level in more than a year.

The effects of the war in Iran are also being felt in other economies. In the eurozone, the composite measure of input costs rose to a three-year high, while output came close to stagnation.

In India, business activity recorded its weakest growth since October 2022, while the composite input price index rose to near a four-year high. In Japan, the materials cost index reached its highest level since April last year, even as output growth slowed.