The combination of “accelerated growth+cooling inflation” appeared! The US PMI rose to the highest level since 2022 in August

The Zhitong Finance App learned that business activity in the US accelerated markedly in August, and the strong expansion of the service sector drove the growth rate of overall economic activity to the highest level in more than four years. At the same time, corporate recruitment and future business confidence improved markedly. Meanwhile, price pressure has cooled down, providing a new positive signal for the market to evaluate America's economic growth and inflation prospects.

According to early August data released by S&P Global on Friday, the US Composite Purchasing Managers' Index (PMI) output index rose from 54.5 in July to 56.0, the highest level since April 2022, and accelerated markedly for the second month in a row. A PMI above 50 means that economic activity is expanding.

Among them, the service sector became the main driving force for economic growth this month. The US service sector PMI business activity index rose sharply from 54.6 to 56.8 in August, hitting a 20-month high, indicating that relatively weak service activity in the previous second quarter was clearly picking up.

In contrast, the expansion of the manufacturing industry has weakened. The manufacturing PMI fell from 53.9 to 53.2 in August, the lowest in five months; the manufacturing output index fell from 53.9 to 51.9, the lowest level in 13 months.

S&P Global said that business activity in the US accelerated in August to the fastest level since April 2022, indicating that economic growth has accelerated markedly in the third quarter so far, but the performance between manufacturing and service industries has diverged. The manufacturing industry, which had been strong in the second quarter, gradually lost momentum in the summer, while the service sector became a new engine of growth.

On the demand side, orders from US companies as a whole have maintained strong growth. The manufacturing and service sectors both recorded a relatively steady increase in new orders in August, but the growth rate of manufacturing orders slowed, while demand in the service sector improved further.

The cooling in manufacturing growth is partly related to the gradual decline in precautionary inventory accumulation carried out by companies to deal with the risk of price increases and supply shortages brought about by the Middle East war. The increase in inputs purchased by manufacturers in August fell to its lowest level since this year, and shortages of raw materials also limited production to a certain extent.

However, US companies are still facing obvious supply chain pressure. Supplier delivery times were drastically extended again in August, and the degree of deterioration was at a high level in the past four years. The companies surveyed attributed this to factors such as shipping delays, tariffs, and insufficient supplier inventory.

Due to supply delays, the manufacturing industry continues to accumulate unfulfilled orders. Since the Middle East war began, the manufacturing backlog has grown at a rate not seen since 2022. At the same time, strong demand and supply restrictions have also begun to affect the service industry. The growth rate of unfulfilled orders in the service sector in August was the fastest since May 2022.

Business confidence rebounded, and recruitment growth hit the fastest rate in a year and a half

As orders increased and companies became more optimistic about future economic prospects, the US job market also improved markedly.

The number of people employed by US companies increased dramatically in August, and the recruitment growth rate hit the fastest rate since January 2025, and the second highest level in the past four years. In the previous eight months, there was almost no significant change in the overall number of people employed in US companies.

Among them, recruitment growth in the service sector was particularly strong, reaching the highest level since the beginning of last year; the number of people employed in the manufacturing industry also increased, the highest increase since May this year.

The improvement in companies' willingness to hire was mainly driven by increased orders and increased business confidence. In August, the company's output expectations for the next year improved for the third month in a row, to the highest level since November last year.

The company said that the increase in backlog orders, increased customer inquiries, business expansion plans, and concerns about tariffs and the economic impact of the Middle East war have been mitigated, together improving future business expectations. Confidence has increased in both manufacturing and service businesses.

Inflationary pressure has cooled, and sales price increases have clearly slowed

Meanwhile, the pressure on corporate prices showed signs of easing in August.

Looking at the comprehensive goods and services industry, the average investment cost growth rate of enterprises fell to its lowest level since February this year. Among them, cost inflation in the service sector fell markedly from the 14-month high set in July, while the growth rate of investment costs in the manufacturing industry declined for the third month in a row.

However, judging from the historical level, the cost pressure on enterprises is still too high. The companies interviewed said that high energy prices, tight supply chains, and tariffs are still driving up operating costs. Due to strong price pressure in July, the average cost increase so far in the third quarter is still slightly higher than in the second quarter.

As input cost inflation fell to its lowest level since the beginning of the Middle East War, the pressure on companies to pass on costs to consumers also waned.

The average sales price increase of goods and services in August fell to its lowest level since November last year. Among them, sales price inflation in the service sector fell to its lowest level in 10 months, while the manufacturing industry fell to its lowest level in 6 months. Companies mentioned that there has been a marked reduction in the need to pass on rising fuel and energy costs, which is an important reason for the slowdown in sales price increases.

The manufacturing industry continues to expand, but growth momentum continues to weaken

Taken separately, the initial US manufacturing PMI fell from 53.9 to 53.2 in August. Although it hit the lowest level since March, it is still in a relatively high range over the past four years.

Manufacturing output growth slowed for the third month in a row and fell to its lowest level since July last year. The performance of new orders was relatively resilient, but the growth rate also fell to its lowest level since March.

Inventory factors also dragged down the manufacturing PMI. In August, corporate input purchases declined for the first time since February this year.

However, extended supplier delivery times and employment growth have provided some support for manufacturing PMI. Although the extent of supply delays has eased slightly from before, it is still the third worst level in the past four years; the number of people employed in the manufacturing industry increased moderately, reaching the highest increase since May.

Overall, the August PMI data shows that the momentum of US economic growth is clearly increasing. The rapid recovery in the service sector has offset the impact of cooling in the manufacturing industry, while corporate recruitment and business confidence are improving simultaneously. What is more noteworthy is that while economic activity is accelerating, the increase in enterprise investment costs and sales prices has instead slowed down, showing a combination of “accelerated growth and cooling price pressure.” However, energy prices, tariffs, and supply chain bottlenecks have kept corporate costs at historically high levels, and it remains to be seen whether the temperature will continue to cool down in the future.