US business activity hits fastest pace since 2022

U.S. business activity strengthened in August, with S&P Global’s (SPGI) flash Composite Output Index rising to 56.0 from 54.5 in July. This marks the highest reading since April 2022 and signals a broad-based expansion across the private sector. The index, which covers both manufacturing and services, indicates that overall output growth gained further momentum late in the summer.

The data show that the expansion is not confined to a single industry, but the profile of growth is uneven. Services activity accelerated sharply, while manufacturing growth cooled modestly but remained positive. Overall, the figures point to an economy that is still expanding at a solid pace despite easing in some pockets.

The services sector was the main driver of August’s improvement. S&P Global’s (SPGI) flash Services Purchasing Managers’ Index increased to 56.8 in August from 54.6 in July. This was the strongest services reading since December 2024, underscoring a clear reacceleration in activity among service providers.

Growth in new services business in August was the fastest since December 2024, highlighting firm demand conditions. At the same time, services hiring rose by the most in 19 months, indicating that firms were adding staff to meet increased workloads. These indicators together suggest robust momentum in services output heading into the latter part of the third quarter.

Manufacturing showed a softer profile but stayed in expansion territory. The flash Manufacturing PMI eased to 53.2 in August from 53.9 in July, marking a five-month low for manufacturing growth. Despite the slowdown, the reading remained above the 50 level that separates expansion from contraction.

The cooling in manufacturing contrasts with the stronger gains in services, but does not yet point to a downturn in factory activity. Instead, it suggests more moderate growth in goods production alongside a stronger upswing in services, shaping a mixed but still positive picture for the industrial side of the economy.

S&P Global stated that the survey data point to U.S. output growth in the third quarter running at an annualized pace approaching 3.0%. This compares with an estimated annualized pace of about 1.5% in the second quarter, implying a notable pickup in economic momentum. The flash PMIs therefore indicate that overall growth has strengthened as the third quarter has progressed.

On prices, the survey showed that inflationary pressures eased somewhat in August. However, both input costs and selling prices remained elevated. S&P Global noted that the average cost increase so far in the third quarter has slightly exceeded that seen in the second quarter. This suggests that, even as price pressures moderate, firms are still facing higher costs that may continue to filter through to final prices.