U.S. private-sector activity accelerated sharply in August, with services, employment and business confidence strengthening as price pressures cooled and S&P Global’s survey data pointed to third-quarter economic growth approaching a 3% annualized rate.
By yourNEWS Media Newsroom
The U.S. economy entered the latter part of the third quarter with accelerating business activity, a sharp rebound in hiring and easing inflation pressures, according to new S&P Global survey data showing private-sector output expanding at its fastest pace in more than four years.
The S&P Global Flash U.S. Composite PMI Output Index climbed to 56.0 in August from 54.5 in July, reaching its highest level since April 2022. A reading above 50 signals expanding business activity.
“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 stronger August results suggest that economic growth has accelerated considerably from 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.
Services were the primary engine of the expansion.
The service-sector business activity index increased to 56.8 from 54.6, reaching its strongest reading in 20 months. Companies reported robust growth in new business while unfinished work accumulated at the fastest rate since May 2022.
Employers responded to the stronger demand by increasing staffing at the fastest pace since the beginning of last year.
That marked a significant change from the previous eight months, during which private-sector employment had shown little net movement.
Overall employment growth in August was the strongest recorded since January 2025 and the second-largest increase of the past four years.
Factories also stepped up hiring, recording their largest employment increase since May.
S&P Global said improving order books, greater confidence among businesses and expectations for stronger future demand contributed to the revival in hiring.
“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.
Companies also became more optimistic about the months ahead.
Business expectations strengthened for the third consecutive month and reached their highest level since November. Firms cited expanding backlogs of work, increased inquiries from customers and plans for further growth, while concerns surrounding tariffs and the Middle East conflict diminished.
The stronger readings for output, demand and employment were accompanied by a slowdown in inflationary pressures.
Average costs paid by manufacturers and service providers increased at their slowest pace since February.
The improvement was particularly notable in services, where cost inflation had reached a 14-month high in July before cooling substantially in August.
Manufacturing input-cost inflation also declined for the third consecutive month.
Businesses were simultaneously raising their own prices more slowly.
Selling-price inflation across the private sector dropped to its lowest level since November. The rate of increase fell to a 10-month low among service providers and a six-month low among manufacturers.
S&P Global said fewer businesses reported having to pass increases in fuel and energy costs along to customers.
The combination of faster economic activity and softer price pressures made the August report particularly favorable, with businesses producing more, hiring more workers and reporting stronger demand without a corresponding acceleration in inflation.
Manufacturing was the primary area in which momentum moderated.
The headline manufacturing PMI fell to 53.2 in August from 53.9 in July, its lowest reading in five months. Despite the decline, the index remained in expansionary territory and was still among its strongest levels of the past four years.
Manufacturing output weakened more noticeably, with the index dropping to 51.9 from 53.9 as factory production increased at its slowest rate in 13 months.
Part of that slowdown reflected the fading of precautionary inventory building that had followed the outbreak of conflict in the Middle East.
Manufacturers also reported that shortages of raw materials and shipping delays were limiting production.
Other factory indicators remained positive, however. New orders continued growing, backlogs increased and manufacturers added employees.
The overall results therefore showed a divergence between a rapidly accelerating service economy and a manufacturing sector that remained in expansion but was growing more slowly.
S&P Global’s report also indicated that fears surrounding tariffs and geopolitical disruption were exerting less influence on corporate decisions than earlier in the year, helping companies become more willing to hire and pursue expansion plans.
If the survey’s third-quarter signal holds, annualized economic growth near 3% would represent a substantial improvement from the 1.5% pace recorded during the second quarter.
The August figures also present policymakers with an unusually favorable combination of economic signals: faster output growth, stronger hiring, rising confidence and moderating price increases.
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For the broader economy, however, S&P Global’s August data point to considerably stronger momentum entering the final weeks of the third quarter, led by services and a renewed willingness among private employers to add workers.
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