U.S. business activity accelerated in August, driven by the strongest expansion in the services sector since December 2024, according to S&P Global’s latest Purchasing Managers’ Index survey. The services PMI rose to 56.8 from 54.6 in July, exceeding expectations of 54.0 and marking the highest reading in nearly two years.
The broader composite output index climbed to 56.0 from 54.5, its strongest level since April 2022. Economists at S&P Global estimate third-quarter annualized growth approaching 3.0%, up from the 1.5% pace recorded in the second quarter. The acceleration reflects robust demand in consumer-facing and financial services, offsetting weakness in manufacturing.
Manufacturing activity, however, slowed to a five-month low of 53.2 in August, down from 53.9 in July. The decline was attributed to reduced stockpiling, supply chain disruptions, and the impact of the six-month-old U.S.-led conflict with Iran, which has restricted key trade routes including the Strait of Hormuz and lifted energy prices. Factory output growth was the weakest in 13 months.
Price pressures remained elevated despite some easing, with input costs and selling prices still running above long-term averages. S&P Global noted that further energy price spikes could reignite inflationary pressures. Services hiring expanded at the fastest pace in 19 months, while factory employment growth slowed.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the data indicated a sustained expansion led by services, with annualized growth tracking near 3.0% in the third quarter. He added that while temporary boosts from events such as the FIFA World Cup and Independence Day celebrations had faded, underlying momentum remained strong.
