US economy may be edging towards stagflation as growth slows and inflation stays sticky
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The US economy may be entering a stagflationary phase due to slowing growth, persistent inflation, and emerging labor market weakness. The services sector activity cooled in March, while price pressures surged, reinforcing concerns about the economy's fragile phase.
The US economy is showing signs of stagflation. The services sector activity cooled in March, with the ISM Services PMI falling to 54. The services employment index dropped to 45.2, indicating contraction. Inflation remains high, with the ISM prices paid index jumping to 70.7. The core Personal Consumption Expenditures price index remained elevated at 3% year-on-year in February. Economic growth has slowed sharply, with US GDP expanding just 0.5% in the fourth quarter of 2025.
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