U.S. March manufacturing PMI beats estimates; services miss…sector outlook diverges

The U.S. manufacturing purchasing managers’ index (PMI) for March topped expectations, while the services index fell short.

On the 24th (local time), S&P Global reported a preliminary manufacturing PMI of 52.4, above the market forecast (51.5). The preliminary services PMI released at the same time came in at 51.1, below the expected 52.

The PMI uses 50 as the baseline to gauge whether business conditions are expanding or contracting. A reading above 50 indicates expansion, while below 50 signals contraction.

S&P Global said the latest PMI results suggest that the fallout from the Middle East war is bringing both a growth slowdown and rising inflationary pressures at the same time. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said, “March’s PMIs point to an undesirable combination of slowing growth and rising inflation,” adding that “war-driven uncertainty and higher energy prices are weighing on demand.”

He also noted that “price indicators point to the possibility that consumer inflation could rebound to around 4% again,” and warned that “the risk of stagflation—slower growth alongside higher inflation—is increasing.”

He added that “the U.S. Federal Reserve (Fed) is in a position where it must strike a policy balance between rising inflation pressures and the risk of a slowdown,” and said that “whether the war persists, energy prices, and supply-chain impacts will be key variables going forward.”