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NICE PMI REPORT - TOO BAD IT'S FLEETING

Business activity in the United States is, on balance, expanding at an accelerated pace in March.

S&P Global's preliminary "flash" purchasing managers' index $(PMI.UK)$ for the manufacturing USMPMP=ECI and services USMPSP=ECI sectors showed factory activity unexpectedly sliding into contraction - to 49.8 from 52.7.

On the other hand, services' expansion surprised in the other direction by gathering steam, rising 3.3 points to 54.3.

S&P Global's composite reading of those two indexes printed at 53.5, marking 1.9-point acceleration.

A PMI reading north of 50 indicates monthly expansion. Below that level signifies contraction compared with the prior month.

The report marks the first manufacturing contraction this year, which S&P Global attributes to the fading effect of manufacturers "frontrunning of tariffs."

On the services side, the accompanying press release says the stronger-than-expected services reading could be a temporary bounce after severe weather conditions hobbled activity in the first two months of the year.

The near-term business outlook soured "to one of the gloomiest readings seen over the past three years," writes Chris Williamson, Chief Business Economist at S&P Global.

That gloom was "largely caused by growing worries over negative impacts from recent policy initiatives from the new administration," Williamson says. "Most widely cited were concerns about the impact of Federal spending cuts and tariffs."

Williamson goes on to say the tariffs were a key concern among survey participants, particularly their impact on inflation.

"Firms' costs are now rising at the steepest rate for nearly two years, with factories increasingly passing these higher costs onto customers," Williamson adds.

The report amounts to a calm before the storm; it's an eventful week in economic indicators. Housing data and durable goods are on tap.

Things build to a crescendo with the Commerce Department's final take on fourth-quarter GDP on Thursday, and things wrap up on Friday, with the main event - the wide-ranging and closely watched Personal Consumption Expenditures (PCE) report.

PCE includes income and spending growth, the saving rate, and crucially, the PCE price index - Powell & Co's preferred inflation yardstick.

(Stephen Culp)

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