U.S. Business Activity Accelerates in August, Manufacturing Surges

U.S. business activity experienced a notable increase in August, driven primarily by a revitalized manufacturing sector. According to a report released on Thursday by S&P Global, the flash U.S. Composite PMI Output Index rose to 55.4 in August, up from 55.1 in July. This marks the highest level since December 2022. A figure above 50 indicates expansion in the private sector, signaling positive economic momentum.

The manufacturing sector played a significant role in this growth, with its flash PMI surging to 53.3, a substantial rise from 49.8 in July. This increase defied economists’ expectations for a continued contraction, as order activity reached its highest level since February 2024. The resurgence in manufacturing suggests a strong outlook for the economy, with Chris Williamson, chief business economist for S&P Global Market Intelligence, stating, “The data are consistent with the economy expanding at a 2.5% annualized rate, up from the average 1.3% expansion seen over the first two quarters of the year.”

Key Insights from the Latest Survey

While manufacturing showed robust growth, the services sector experienced a slight decline, with its PMI easing to 55.4 from 55.7 in July. Economists surveyed by Reuters had predicted a more significant drop, forecasting the services PMI would fall to 54.2. Despite this slowdown, the overall economic picture remains positive.

The survey highlighted a notable increase in input prices, which rose to a three-month high of 62.3, up from 61.3 the previous month. Both sectors reported rising costs, with companies attributing these increases to tariffs implemented during the administration of former President Donald Trump. The report noted that, “Companies across both manufacturing and service sectors collectively reported the steepest rise in input prices since May and the second-largest increase since January 2023.”

Additionally, businesses increased prices for goods and services, with the measure reaching a three-year high of 59.3. This indicates that companies are increasingly passing on the costs of higher tariffs to consumers, reflecting broader inflationary pressures within the economy.

Employment Trends and Economic Outlook

The employment landscape also showed signs of improvement. The composite employment index for both manufacturing and services increased to 52.8, the highest level since January, up from 51.5 in July. This uptick suggests that businesses are responding to growth by expanding their workforce, further supporting the positive economic outlook.

Overall, the latest survey data from S&P Global indicates that U.S. businesses are enjoying a strong third quarter, with the manufacturing sector leading the way. As the economy continues to recover, stakeholders will be closely monitoring these trends to assess their impact on future growth.