US business activity slows in April due to growing tariff concerns

The data released on Wednesday showed that US Flash Composite PMI Index, which tracks the performance of both manufacturing and services sectors, dropped to 51.2 in April from 53.5 in March, hitting the lowest level since December 2023.

Slightly better situation was in the industrial sector, as Manufacturing PMI remained above 50 threshold and ticked higher in April (50.7 from 50.2 in March), while activity in services sector slowed significantly and fell to 51.4 this month from 54.4 in March and missed forecast at 52.8.

Slowdown in the US business activity in April and rise of prices charged for goods and services was mainly driven by growing uncertainty caused by tariffs and their anticipated negative impact on the economy, that boosted fears of stagflation, scenario in which the US central bank will stand between two opposite and strong forces.

The financial markets remain concerned about escalation of trade war after the US imposed 145% tariffs on almost all goods from China, with immediate strong counter measures from Beijing on 125% tax on US imports and probably the most significant step from Chinese side – the decision cut deals with Boeing.

Subsequent reaction of President Trump with much calmer tones and signals that tariffs would be significantly lowered (but not completely cut) boost optimism that the worst scenario – in which global economy would be hurt by trade war escalation – could be avoided.