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The impact of the Middle East war on demand has intensified, causing a significant slowdown in U.S. service sector growth

BlockBeats News, May 5th, Chief Business Economist of S&P Global Market Intelligence, Chris Williamson, stated, "Following a slight dip in March, U.S. business activity has resumed its growth. However, it is clear that growth momentum has significantly slowed since the beginning of the year.


Survey data indicates that GDP is growing at a modest annualized rate of around 1%. Growth is likely to weaken further as the service sector reports a reduction in new business inflows for the first time in two years, reflecting an intensification of the impact of the Middle East war on demand. The war's direct effects are most apparent in the service sector, where elevated prices have led to a decline in discretionary spending (such as holidays and entertainment). Additionally, high fuel costs and travel disruptions have also hindered transport activity.


However, the decline in financial services demand is partly related to increasing uncertainty about market prospects, and it also reflects market expectations of higher inflation and rate impacts on real estate and credit activities. Input cost inflation continues to rise, fuel prices are increasing, and prices of goods and services are generally on the rise, with wages also increasing. These factors will feed through to consumer inflation in the coming months." (FXStreet)

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