In March, the US service industry maintained expansion but the growth rate slowed down, with evident increase in inflation pressure.

The US service sector continued to expand in March, but at a slower pace. Meanwhile, inflationary pressures have increased significantly, and employment performance unexpectedly weakened, reflecting signs of differentiation in the economic structure amid geopolitical conflicts and rising costs. According to the latest data released by the Institute for Supply Management (ISM), the service sector PMI in March was 54%, a decrease of 2.1 percentage points from February's 56.1%. However, it has been in the expansion zone for 21 consecutive months and is higher than the 12-month average (52.3%), indicating that the overall service sector still has resilience. Looking at the sub-indices, the business activity index fell to 53.9%, the lowest level since September 2025, indicating a weakening of growth momentum. However, the new orders index rose to 60.6%, reaching a new high since February 2023, indicating that demand side is still strong and providing support for the economy moving forward. Of note is the significant weakening in the employment index. The employment index in March fell to 45.2%, a sharp decline of 6.6 percentage points from the previous value, entering contraction territory for the first time in four months and reaching the lowest level since the end of 2023, becoming the main "surprise" in this report. At the same time, price pressures have significantly increased. The price index rose to 70.7%, a substantial increase of 7.7 percentage points from the previous month, reaching the highest level since October 2022, and has been in the upward zone for 106 consecutive months. The report pointed out that rising oil prices and fuel costs are among the main factors driving price increases. In terms of the supply chain, the supplier deliveries index rose to 56.2%, remaining in the expansion zone for the 16th consecutive month, indicating a slowdown in delivery speed. ISM pointed out that this is related to transportation disruptions in the Middle East and weather factors, further exacerbating operational pressures for businesses. In terms of inventory, businesses have increased stocking to cope with potential supply shocks. The inventory index was 54.8%, expanding for the second consecutive month. Some businesses explicitly stated that they are stocking up on oil-related products to hedge against the risk of escalated conflict in Iran or disruptions in the Strait of Hormuz. Industry distribution shows that in March, a total of 13 service industries experienced growth, including wholesale trade, finance and insurance, accommodation and food services, transportation and warehousing, and information services. Retail, agriculture, and public administration experienced contractions. Business feedback commonly mentioned the uncertainty brought by the conflict in the Middle East. Some businesses pointed out that transportation interruptions, rising oil prices, and potential supply chain risks are increasing costs and affecting international operations, prompting businesses to adjust procurement and inventory strategies.