The US S&P Global Services PMI in March reported that business activity in the sector is slowing sharply, falling to contractionary territory for the first time since January 2023, amid higher inflation and the war in the Middle East.

The index fell from 51.7 in February to 49.8, according to S&P. They noted that, “Overall, it was the lowest index reading for over three years and consistent with a fractional contraction in activity.” 

Rising input prices due to the surge in energy costs are one of the reasons that are weighing on the services sector, as the report read, “the latest price data signaled the continuation of above trend input cost inflation, with prices overall rising to the greatest degree so far in 2026.”

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, wrote, “The service sector has slipped into contraction for the first time since January 2023, dragging the overall economy down to a near-stalled 0.5% annualized rate of growth in March. Worst hit is consumer-facing service sectors where, barring the pandemic lockdowns, the downturn reported in March was among the steepest recorded since data were first available in 2009.”

He added that the “Key to the deteriorating growth trend is a pull-back in spending amid worsening affordability, with costs and selling prices surging higher in March amid spiking energy prices.”

Market reaction to Nonfarm Payrolls data

The US Dollar (USD) remains steady after its modest rise following the Nonfarm Payrolls report, with the US Dollar Index (DXY) trading with modest gains above 100.00.