S&P Global Market Intelligence's Chief Business Economist, Chris Williamson, noted on May 5 that U.S. business activity has resumed growth after a slight decline in March. However, according to Jin10, the momentum has significantly slowed since the beginning of the year. Survey data indicates an annualized GDP growth rate of approximately 1%. Growth may weaken further as the services sector reports a decrease in new business inflows for the first time in two years, reflecting the increasing impact of the Middle East conflict on demand.
The direct effects of the conflict are most evident in the services sector, where high prices have led to a decline in discretionary spending, such as vacations and entertainment. Additionally, high fuel costs and travel disruptions have suppressed transportation activities. The demand for financial services has also decreased, partly due to rising market uncertainty and expectations of higher inflation and interest rates affecting real estate and credit activities.
Input cost inflation has risen further, with fuel prices increasing and prices for goods and services generally rising, alongside wage growth. These factors are expected to contribute to consumer inflation in the coming months.