The impact of the Middle East war intensifies demand shock, and the growth momentum of the US service sector has slowed significantly

Golden Ten Data reported on May 5 that Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated, “After a slight decline in March, U.S. business activity has resumed growth. However, it is evident that growth momentum has significantly slowed since the beginning of the year. Survey data shows that GDP is growing at a moderate annualized rate of around 1%. Growth may weaken further, as the services sector has reported a drop in new business inflows for the first time in two years, reflecting intensifying demand shocks from the war in the Middle East. The direct impact of the war is most apparent in the services sector, where high prices have led to declines in discretionary spending (such as vacations and entertainment). Additionally, high fuel costs and travel disruptions have also dampened transportation activity. The decrease in demand for financial services, which is partly related to increased market uncertainty, also reflects market expectations that higher inflation and interest rates will affect real estate and credit activities. Input cost inflation has risen further, with higher fuel prices, generally elevated goods and services prices, and rising wages. These factors are expected to feed into consumer inflation in the coming months.”