Growth in US services activity cooled in March, survey data showed Monday, as companies monitored the higher energy prices stemming from the war in the Middle East — and .braced for supply chain disruptions.
The services index of the Institute for Supply Management (ISM) came in at 54 per cent last month, down from 56.1 per cent in February
While new orders remained resilient, business activity cooled slightly and the employment index shrank for the first time in four months, ISM said.
The prices index climbed on the back of higher oil and fuel costs, while supplier deliveries were slower due to shipping issues and flight disruptions caused by the Middle East conflict and winter weather.
The steeper costs came after US-Israeli strikes targeting Iran on February 28 triggered a war that has engulfed the region and seen Tehran all but block the crucial Strait of Hormuz.
The blocking of the waterway, an energy chokepoint, has sent oil and gas prices rocketing as governments around the world scramble to contain the fallout.
READ ALSO: Stock Markets Rise As US Jobs Data Beats Expectations
Overall in March, “continuing strength in business activity, new orders and backlog of orders are positive economic signals,” the ISM report said.
“Companies across many industries reported seeing higher gas and diesel pricing, and inventories of multiple goods increased to withstand supply chain disruptions or short-term oil price impacts,” ISM survey chair Steve Miller said.
Survey participants also flagged that construction products such as lumber, copper and steel had risen in price, he added.
“Transportation disruptions in the Middle East are inhibiting both incoming and outgoing cargoes from the region,” said one respondent in the construction sector.
Another respondent added that “tariff rollbacks are resulting in favourable price adjustments, but the news of new implementation is driving continued uncertainty.”
Companies have been grappling with sweeping US tariffs on various imports since President Donald Trump returned to the White House last year.
The Supreme Court struck down a swath of these duties in February, but Trump has swiftly tapped different authorities to reimpose temporary tariffs as his administration works out more lasting measures.
