Economic Buzz: US services sector sees weak demand despite slight PMI rebound in April

The US services sector showed mixed signals at the start of the second quarter of 2026, according to the latest PMI data from S&P Global. The headline Services PMI Business Activity Index rose to 51.0 in April from 49.8 in March, indicating a return to growth. However, the increase was only marginal and remained below the long-term average.

A key concern was a drop in new business, which fell into contraction for the first time since April 2024. Businesses linked the decline in demand to ongoing uncertainty caused by the war in the Middle East, high inflation, and tariff-related challenges. Export demand also weakened, declining for the fifth straight month.

Despite weaker demand, business activity improved slightly, and employment rose modestly after a small decline in March. Companies reported hiring part-time workers to manage workloads, as backlogs of work continued to grow for the fourteenth consecutive month.

Cost pressures remained strong, driven by higher fuel, gas, supplier, and labor costs. This led to another sharp increase in selling prices as firms tried to protect their margins.

Meanwhile, the US Composite PMI rose to 51.7 in April from 50.3 in March, supported by growth in both services and manufacturing. Although new orders and hiring increased only slightly, business confidence improved. However, inflationary pressures intensified, with input costs rising at the fastest pace seen so far in 2026.

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