U.S. Services Sector Drives Sharp August Business Activity Surge

The U.S. services sector recorded its strongest growth in nearly two years in August, driving a sharp acceleration in overall business activity and more than offsetting slower manufacturing growth. S&P Global’s flash Services PMI rose to 56.8 from 54.6 in July, while the Composite Output Index climbed to 56.0, its highest level since April 2022.

The data suggest the U.S. economy could expand at an annualized pace approaching 3% in the third quarter, nearly double the 1.5% growth recorded in the second quarter. Services business growth also accelerated, supporting the strongest increase in hiring in 19 months. Meanwhile, the manufacturing PMI slipped to 53.2 from 53.9 as inventory building eased and supply disruptions weighed on factory production.

Despite some moderation in August, price pressures remained elevated, with input costs and selling prices still rising at relatively strong rates. S&P Global said renewed increases in energy prices could add to inflation risks, while continued strength in services highlights the growing importance of consumer spending and financial services to the U.S. economic expansion.

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