US DATA: March Services PMI: Confidence Weaker But Positive, Activity Picks Up

Final March Services PMI was revised up 0.1 points from flash to 54.4, reflecting a strong improvement from 51.0 in February. The Composite reading was unchanged at 53.5 (despite an increase in Manufacutring PMI in the final to 50.2 from 49.9, per data out earlier in the week).

• The main headlines from the S&P Global Services PMI release: "Activity and new business growth both pick up…although sentiment about the future remains downbeat...Cost inflation up to 18-month high".
• Government policy shifts were unsurprisingly a huge factor in firms' outlooks, though arguably a little more mixed than the unambiguous negativity seen in other surveys for March: "Confidence in the outlook remained positive overall in March, linked to an expected improvement in economic conditions over the next year. Some firms pointed to the new administration’s economic policies as likely being supportive to growth. However, reflective of the uncertainty in the outlook, concerns persisted over the effects of federal cost cutting initiatives, and in particular, the role of tariffs in raising prices and dampening overall demand. Subsequently, confidence edged lower in March and was, with the exception of last September when sentiment was impacted by uncertainty ahead of the Presidential election, the weakest since December 2022."

Other highlights: 

• "Business activity growth in the US service sector picked up momentum in March, improving noticeably since February on the back of strengthening customer demand. However, some worries over the impact of federal government policies, especially in relation to tariffs, meant confidence in
  the outlook fell to its second lowest since the end of 2022."
• "Jobs growth was also recorded, though only to a modest degree in the context of the survey history amid worries over rising costs. Operating expenses increased in March to the greatest degree in a year-and-a-half, largely attributed by panelists to the impact of tariffs. Competition however limited the ability of firms to pass on higher costs to clients via selling
  prices."
• "Combined with a weak manufacturing reading for March, the survey data point to GDP having risen at an annualized rate of just 1.5% in the first quarter, down sharply from the 2.4% rate seen at the end of last year. "