Overview of the Situation
The United States’ business activity gained momentum in August, primarily driven by the resurgence of the manufacturing sector. This growth is highlighted in the S&P Global Composite Production PMI, which covers both manufacturing and service sectors. The index rose to 55.4 points this month, its highest since December, up from July’s 55.1.
Economic Expansion
Chris Williamson, Chief Economist at S&P Global Market Intelligence, commented on the positive trend: “The robust PMI reading for August reinforces signs that US businesses have experienced a strong third quarter so far.” He added, “The data aligns with an annualized economic growth rate of 2.5%, surpassing the average expansion of 1.3% observed in the first two quarters of the year.”
Manufacturing Sector Rebound
The improvement was largely due to the manufacturing sector, which saw its PMI index jump to 53.3 points—its highest since May 2022—from July’s 49.8. This outcome defied economists’ expectations of another month of contraction.
- The manufacturing sector received a boost from new order activity, which reached its highest level since February 2024.
- The service sector, however, dipped to 55.4 from July’s 55.7, although economists surveyed by Reuters had predicted 54.2 points.
Rising Input Prices
The survey also measured the prices paid by businesses for inputs, which reached a three-month high of 62.3, up from 61.3 in the previous month.
“Both service and manufacturing sectors reported significant increases in input prices,” the report stated. “The rate of increase accelerated in both sectors.”
The report attributes the rise to tariffs imposed by President Donald Trump, which have been cited as the primary driver behind the increase in input costs.
Key Questions and Answers
- What is the S&P Global Composite Production PMI? It’s an index that analyzes both manufacturing and service sectors in the United States, with readings above 50 indicating private sector expansion.
- Why is the August PMI reading significant? The 55.4 points mark the highest since December, signaling continued growth in US business activity.
- Which sectors contributed most to the growth? The manufacturing sector experienced substantial growth, with new order activity reaching its highest level since February 2024. The service sector, however, saw a slight decline.
- What factors led to rising input prices? Tariffs imposed by President Donald Trump are cited as the main reason for the increase in input costs across both manufacturing and service sectors.
