Business activity in the United States showed signs of improvement in March, according to the latest data from S&P Global’s Manufacturing PMI survey, but a noticeable dip in overall business sentiment signals growing concerns about the economy’s near-term prospects.
The survey revealed that the Composite Output Index, which covers both the manufacturing and services sectors, rose to 53.5 in March from 51.6 in February, indicating expansion. A reading above 50 typically signals growth in the private sector, with the services sector being the primary contributor to the improvement in activity, mirroring a trend seen in the UK earlier in the day.
However, manufacturing performance took a hit, with the US Manufacturing PMI dropping to 49.8 from 52.7 in February, falling below the neutral 50.0 threshold. This marks the first slight decline in the manufacturing sector since December, driven by a contraction in factory output following an initial boost from tariffs earlier in the year.
Despite the positive uptick in March’s business activity, US companies’ outlook for the coming year has taken a downward turn for the second consecutive month. Business confidence has dipped to its lowest point since late 2022, with the exception of a brief slump around the presidential election period.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented: “The near-term risks appear to be tilted to the downside. Growth is now heavily concentrated in the services sector, while manufacturing has fallen back into decline. March’s improvement in services activity was also influenced by a recovery from weather-related disruptions earlier in the year, suggesting this may be a temporary bounce.”
Williamson further noted that business confidence is at one of its lowest points in the past three years, largely attributed to growing concerns over the impact of recent policy initiatives from the current administration. He specifically pointed to apprehensions regarding federal spending cuts and the ongoing effects of tariffs as significant contributors to the prevailing gloom.
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