U.S. manufacturing activity strengthened sharply in September, with factories reporting their fastest growth in output in more than four years as new orders and hiring accelerated, according to a survey released Wednesday.
The S&P Global flash manufacturing purchasing managers’ index jumped to 57.0 from 53.9 in August, far above the 53.6 reading economists had expected. A reading above 50 indicates an improvement in business conditions from the previous month. September’s reading was the highest since May 2022.
The gain extended beyond the headline index. The survey’s measure of factory output rose to 56.7 from 53.1, its highest level since April 2022. Manufacturers reported their strongest growth in new orders since that month, while factory employment increased at its fastest pace since February 2021. Inventories also rose at a quicker rate.
The figures point to a strong September for factories after a softer August in the government’s production data. Federal Reserve figures released last week showed manufacturing output fell 0.3 percent in August, its first monthly decline this year. The purchasing managers’ survey measures changes reported by companies in September, giving an early indication of whether that decline persisted.
The September improvement was accompanied by a surge in services activity. S&P Global’s services business activity index climbed to 58.7 from 56.5, exceeding economists’ forecast of 56.0 and reaching its highest level in nearly five years. Service providers reported their strongest growth in new business since March 2022.
Together, the two sectors pushed S&P Global’s composite output index to 58.4 from 56.0 in August. That was its highest reading since July 2021 and marked a fourth consecutive month of accelerating growth. The survey attributed much of the increase in orders to domestic customers. Goods exports continued to fall, while services exports grew modestly.
Companies also stepped up hiring to meet demand. Employment across manufacturing and services rose at the fastest pace since June 2022. Even with the additional workers, unfinished orders accumulated at their quickest rate since May 2022, suggesting that firms were struggling to keep up with incoming business.
“US business continues to boom,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. He said historical comparisons of the survey pointed to annualized economic growth of about 5 percent in September and 4 percent for the third quarter as a whole.
A separate measure of current economic growth also points to a strong quarter. The Federal Reserve Bank of Atlanta’s GDPNow model estimated third-quarter growth at a 5.1 percent annual rate as of Sept. 17, its latest update before Wednesday’s survey. GDPNow is a running estimate based on economic data available before the government publishes its initial gross domestic product figure.
The survey results add to evidence of economic resilience amid rising longterm rates and the Federal Reserve raising its benchmark interest rate by a quarter percentage point. The breadth of September’s increase is particularly notable: factories reported faster production, stronger orders, and more hiring at the same time that services activity continued to expand rapidly.
The expansion brought stronger cost pressures. Businesses reported their fastest rise in input costs since October 2022, citing higher fuel and transportation expenses. Selling prices also rose more quickly than in August, though their rate of increase remained below the levels recorded from March through July.
Read the full article here