| The US services sector saw a small decline in activity in March 2026, marking its first contraction in over three years, according to S&P Global data. The Services PMI index dropped to 49.8 from 51.7 in February, indicating a mild slowdown.
Businesses reported weaker demand, with new orders growing at the slowest pace in nearly two years. Many companies linked this slowdown to reduced client confidence, largely concerns over rising prices and uncertainty caused by the ongoing conflict in the Middle East.
Exports also fell more sharply, as trade tensions and tariffs combined with the negative impact of the conflict on global sentiment. Looking ahead, business confidence weakened, with firms worried about higher living costs, possible travel disruptions, and elevated interest rates.
As a result of softer demand and uncertainty, companies slightly reduced their workforce for the first time since December. Backlogs of work grew at a slower pace, suggesting easing pressure on capacity.
Meanwhile, costs continued to rise, driven mainly by higher energy prices, along with increased labor expenses and supply shortages. Many businesses passed these higher costs on to customers, leading to faster increases in prices charged.
Overall, the broader US private sector showed only marginal growth in March, with the Composite PMI falling to 50.3. A stronger manufacturing sector helped offset the decline in services, but growth in new business slowed and hiring fell for the first time in over a year. |