U.S. business activity expanded this month at the fastest pace in nearly a year, driven by solid demand for services, which allowed services firms greater leeway to boost prices.

The S&P Global flash March composite purchasing managers index rose 3.2 points, to 53.3, the group reported Friday. Readings above 50 indicate expanding output. A gauge of prices charged by service providers increased to a five-month high.

The improvement in the composite measure of output at factories and services providers, along with signs of lingering inflationary pressures, highlights the challenge faced by the Federal Reserve. While policymakers would typically interpret such data as a green light to keep pressing forward with interest-rate increases, officials are also cognizant of recent troubles in the banking system.


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