Key facts
- US business activity accelerated in August, with the services sector showing its strongest growth in nearly two years.
- The S&P Global Composite Output Index rose to 56.0 in August, the highest since April 2022.
- The services PMI increased to 56.8, while the manufacturing PMI eased to a five-month low of 53.2.
- Overall US economic growth is on track to double the second quarter's 1.5% annualized expansion rate.
- Inflationary pressures on input costs and selling prices remain elevated.
The U.S. services sector's robust performance in August significantly boosted overall business activity, according to S&P Global's Purchasing Managers' Index surveys. The services PMI reached its highest level since December 2024 at 56.8, while the Composite Output Index climbed to 56.0, indicating the fastest overall business growth since April 2022. This strength in services more than compensated for a slowdown in the manufacturing sector, which experienced its weakest output growth in 13 months. Manufacturing has been hampered by reduced inventory building and supply chain disruptions, exacerbated by the U.S.-led conflict with Iran and its impact on vital shipping routes like the Strait of Hormuz. Economists had anticipated a slight easing in the services PMI and a steady manufacturing PMI, but the actual results showed a stronger-than-expected acceleration in business activity. The current trajectory suggests U.S. economic growth could approach an annualized rate of 3.0% in the third quarter, a substantial increase from the 1.5% expansion seen in the second quarter. Despite some easing, inflation pressures on input costs and selling prices remain elevated, with potential for renewed upward pressure on energy prices.