In August, US business activity increased at the quickest rate in over four years as the S&P Global Flash US Composite PMI strengthened to 56.0 from 54.5 in July. The reading signaled the fastest expansion since April 2022 and an unexpectedly robust beginning to the third quarter. An index reading above 50 indicates expansion and that the August was broad in nature across the private sector.
The manufacturing sector expanded at a slower rate, while services saw a bounce back. The latest services sector data also continued to provide positive momentum for the economy. The Flash Services PMI rose to 56.8 from 54.
6 in July, which was the strongest level since December 2024. Buoyed by improving demand, firms built up inventories by stepping up production and hiring, offsetting the slowdown in manufacturing. Manufacturing but provided a more mixed bag. The Manufacturing PMI fell to 53.
2 from 53.9, the lowest in five months, but still remained above 50.0 indicating expansion. S&P Global highlighted weaker stock building and renewed supply-chain disruptions as factors dragging factory activity down with freight issues and rising energy-related costs still impacting firms.
The most positive aspect of the report was that hiring picked up. Firms hired at the fastest pace since the beginning of 2025 with jobs growing mostly quickly among service providers. The pick up in hiring shows that companies are more optimistic about the future and are hiring more workers to cope with the increased activity.
Business confidence increased too. S&P Global revealed that “business optimism was the strongest since January”, as expectations for future output increased to a nine-month high.
The report also supplied what could be a welcome bit of news to policy makers: price pressures abated in August. The deceleration in selling-price inflation and moderations in input-cost growth from the previous month were positive signs. S&P Global But cautioned that cost pressures may continue to be high given how energy costs and supply issues can sustain a possible resurgent inflation. The pick up in growth alongside easing inflation is more encouraging for the US economy in general.
Based on the latest PMI numbers, economic growth in the third quarter could be running close to an annualized rate of 3% compared with 1.5% in the second quarter.
Meanwhile, PMI surveys can not be directly equated with official GDP numbers, they do give a good early indication of how the economy is faring. The pace of US companies’ output growth is the strongest in more than four years, buoyed by rising demand and strengthening confidence, S&P Global Market Intelligence Chief Business Economist Chris Williamson has said.
The results of the August survey indicate that the US economy has entered the second part of 2026 with far greater strengths of growth than forecast by a great many businesses earlier in the year. Yet, some downside risks were still identified. The report referred to “ongoing supply-chain disruptions and a new degree of uncertainty over energy prices and geopolitical tensions.” Growth in manufacturing has also slowed, suggesting that the recovery is uneven throughout the economy.
