Business activity in the United States increased in August, driven by the manufacturing sector, which posted the strongest growth in orders in 18 months, according to a preliminary survey of Purchasing Managers' Indexes (PMI) by S&P Global. The US Composite Output PMI rose to 55.4 from 55.1 in July, the highest level since December. A reading above 50 indicates private sector expansion.
The manufacturing sector showed a significant rebound as the PMI rose to 53.3 from 49.8 in July, defying analysts' expectations for a second consecutive month of contraction. The growth was largely driven by new orders activity, which was at its highest level since February 2024. The services sector, on the other hand, slowed slightly, falling to 55.4 from 55.7, but still beating market expectations of 54.2.
On the cost side, the survey found that the input price index rose to a three-month high of 62.3, with both manufacturing and services sectors reporting price increases. Companies cited President Donald Trump's tariffs as a key factor driving the cost increases. In addition, the selling price of goods and services jumped to a three-year high of 59.3, indicating that companies are increasingly passing on the cost of tariffs to consumers.
On the employment front, the report also showed an improvement, with the composite employment index rising to 52.8, the highest since January, from 51.5 in July. According to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, the strong reading for August is in line with expectations for US economic growth of 2.5% annually, compared with an average of 1.3% in the first half of this year.
