U.S. services sector activity accelerated sharply in August, reaching its highest level in 20 months, according to preliminary data from S&P Global. The seasonally adjusted U.S. Services Purchasing Managers' Index (PMI) rose to 56.8 from 54.6 in July, surpassing expectations of 53.9 and marking the strongest expansion since December 2024.
The manufacturing PMI, by contrast, declined to 53.2 from 53.9 in the prior month, falling short of forecasts. The composite PMI, which combines services and manufacturing, increased to 56.0 from 54.5, exceeding projections of 54.0. A reading above 50 indicates expansion in both sectors.
The shift in momentum toward services reflects growing resilience in the world's largest economy. S&P Global Chief Business Economist Chris Williamson noted that firms reported the fastest output growth in more than four years during the third quarter. Survey data for the period point to annualized economic growth approaching 3.0%, up from the 1.5% pace recorded in the second quarter.
Manufacturing headwinds persisted, with supply disruptions linked to the Middle East conflict and reduced inventory building cited as key constraints. Williamson described supply flow disruptions as "one of the greatest extents seen over the past four years," which continued to limit production at many companies.
Price pressures remained elevated, with the potential for further increases if energy costs surge. Hiring activity showed signs of recovery as employers gained confidence that geopolitical and tariff risks were easing, supporting a "welcome revival" in labor demand.
