Stagflation Shadows: U.S. Manufacturing Shines as Services Slump to 11-Month Low

The S&P Global Flash PMIs for March 2026 showed that the growth of the US private sector was slowing down. At 51.4, down from 51.9 in February, the composite index reached an 11-month low and had its worst quarterly performance since Q4 2023. Although all readings remained above the 50 expansion threshold, the data indicated reduced activity generally, with flash estimates based on almost 85% of survey replies.

With the PMI increasing to 52.4 from 51.6, its highest level in five months, manufacturing demonstrated resilience and exceeded expectations. Output and new orders grew, exports rose for the first time in nine months, and businesses mentioned fewer tariff worries as well as safety stock buildup in case of potential supply shocks. Services declined significantly in contrast, with the PMI falling to 51.1 from 51.7, reaching an 11-month low caused by lower new work, export losses, and increased caution among consumers and companies.

Driven mostly by services-sector cutbacks in the face of uncertainty, employment experienced its first decrease in over a year. Energy surges related to Middle East conflicts drove input costs to a 10-month high, forcing output prices to grow at the quickest rate since August 2022. The mixed readings indicate that the annualized Q1 GDP growth will be around 1.0% (down from 1.3%). The rising CPI risks point to stagflation risks caused by energy, supply chain, and confidence pressures brought on by the war. Though services fell to a six-month low, manufacturing attitude surged to a 13-month high. Final data will come later this month.