U.S. inflation picture is the worst in almost 4 years

By Greg Robb

S&P Global surveys show that companies are willing to pay more for scarce supplies, in an echo of the pandemic

Tourism and travel barely rose in April, as the Iran war made consumers hesitant to spend, S&P Global said.

The U.S. economy rebounded a bit in April from the near-stagnation seen in the prior month, but the overall inflation picture is now the most worrying since 2022.

S&P Global's index of service companies, which employ most Americans, recovered to a reading of 51.3 in April from a three-year low of 49.8 in the prior month. Any number above 50 signals expansion.

A survey of manufacturing executives rose to an almost four-year high of 54 from 52.3, but the gain partly reflected a scramble to order supplies that might become scarce due to the war with Iran.

Manufacturing contacts reported a steep jump in goods prices, with the rate of inflation at a 10-month high. Service-sector selling prices accelerated to reach a 45-month high.

Key details: Some companies reported "panic" and "emergency" buying ahead of price hikes and supply shortages, in an echo of problems seen during the pandemic.

Prices were spiking for energy and for a wide variety of goods and services, with the average selling prices for goods and services at their highest level since July 2022.

While the service sector recovered, new business rose only marginally. Lost sales were commonly linked to uncertainty and disruption caused by the war. Orders for services ranging from travel to financial products barely rose.

The weakness in spending on services was due to consumers having to spend more of their discretionary income at the gasoline pump, said Eugenio Aleman, chief economist at Raymond James.

Big picture: The improved headline readings in April signal better growth at the start of the second quarter. Still, the overall pace of the economy is subdued.

"The April PMI is broadly consistent with the economy struggling to manage annualized growth in excess of 1%, with the vast service sector acting as the principal drag," said Chris Williamson, chief business economist at S&P Global.

The latest estimate from the Atlanta Federal Reserve's GDP Now tracker points to tepid 1.2% growth in the January-March quarter, following a 0.5% rate in the final three months of 2025. The government will release its initial estimate of first-quarter GDP growth next week.

Market reaction: Stocks SPX opened modestly lower on Thursday. The yield on the 10-year Treasury note BX:TMUBMUSD10Y slipped to 4.292%.

-Greg Robb

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04-23-26 1058ET