U.S. business activity accelerated in August to the fastest pace in more than four years, propelled by a surge in the service sector, a sharp revival in hiring, growing optimism among businesses, and easing inflation pressures, S&P Global said Friday.
“US business is booming, with firms reporting the fastest output growth for over four years so far in the third quarter as the expansion picked up further momentum in August,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said.
The S&P Global Flash U.S. Composite PMI Output Index rose to 56.0 in August from 54.5 in July, reaching its highest level since April 2022. Readings above 50 indicate that business activity is expanding.
S&P said the survey data currently point to economic growth approaching a three percent annual rate in the third quarter, a substantial acceleration from the 1.5 percent pace recorded in the second quarter.
“The survey data for the third quarter are currently pointing to annualized growth approaching 3.0%, up solidly from the 1.5% pace seen in the second quarter,” Williamson said.
The expansion was led by the service sector, where the business activity index jumped to 56.8 from 54.6, its highest level in 20 months. New business increased robustly, outstanding orders accumulated at the fastest rate since May 2022, and companies added workers at the strongest pace since the start of last year.
Employment across the private sector rose sharply after showing little net change over the previous eight months. The increase was the largest since January 2025 and the second-largest recorded during the past four years. Factory employment also strengthened, posting its largest increase since May.
S&P said the hiring revival reflected improved business confidence, fuller order books, and expectations of stronger demand.
“Jobs growth has also shown a welcome revival in August, with employers gaining in confidence as concerns fade over the negative economic impacts of tariffs and the conflict in the Middle East,” Williamson said.
Business expectations improved for a third consecutive month, reaching their highest level since November. Companies pointed to growing backlogs, rising customer inquiries, expansion plans, and diminishing anxiety over tariffs and the Middle East conflict.
The acceleration in growth and hiring was accompanied by encouraging news on inflation. Average input costs across manufacturing and services increased at the slowest pace since February. Inflation in service-sector costs cooled markedly from July’s 14-month high, while factory input-cost inflation moderated for a third consecutive month.
The prices businesses charged their customers also decelerated. Selling-price inflation fell to its lowest level since last November, including a ten-month low in services and a six-month low in manufacturing. S&P said fewer companies reported needing to pass higher fuel and energy costs through to customers.
Manufacturing provided the report’s one softer element. The headline manufacturing PMI slipped to 53.2 from 53.9, a five-month low that nonetheless remained among the strongest readings of the past four years. The manufacturing output index declined to 51.9 from 53.9 as production growth slowed to a 13-month low.
The factory slowdown partly reflected a fading of the precautionary inventory accumulation that followed the outbreak of the Middle East conflict. Raw-material shortages and shipping delays also constrained production. New factory orders continued to expand, backlogs grew, and manufacturers increased employment.
Even so, the August report delivered an extraordinarily favorable combination: the strongest business growth in more than four years, a decisive revival in hiring, rising corporate confidence, robust demand, and a broad moderation in price pressures.
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