• US private sector expansion continues for third consecutive month, though at a slightly moderated pace
  • Input cost inflation accelerates to four-month high, driven primarily by tariff impacts
  • Business confidence reaches highest level since May despite trade-related headwinds

Steady Expansion Amid Cost Pressures

US business activity maintained its growth trajectory in September, with the S&P Global Composite PMI registering 53.9, according to the latest flash estimate. The services sector remained the primary driver of expansion, posting a PMI of 54.2, while manufacturing continued its more modest growth pattern.

The readings indicate the US economy is rounding out its strongest quarter for growth since late 2024, though momentum has eased from August levels. The data suggests the economy is expanding at an annualized rate around 2.2% in the third quarter, according to people familiar with the matter who reviewed preliminary estimates.

Tariff Impacts and Pricing Dynamics

Firms reported the fastest input cost increases since May, with many respondents specifically citing recent tariff measures as the primary driver. "We're seeing significant cost pressures from the new trade policies, particularly on imported components," said one manufacturing executive who asked not to be named due to company policy.

Despite these rising costs, companies demonstrated only modest increases in output prices, suggesting competitive market conditions and softening demand are limiting their pricing power. This dynamic has raised concerns among some analysts about potential margin compression in coming quarters.

Sector Performance and Employment Trends

The services sector, which accounts for the bulk of US economic activity, showed resilient demand though growth moderated to its lowest level since June. Manufacturing expansion also slowed but remained in positive territory at 52.0, down from 53.0 in August.

Employment growth and new order intake both decelerated slightly, though backlogs continued to rise, indicating a gradual rather than sharp expansion. Business confidence nevertheless improved to a four-month high, suggesting firms remain optimistic about future prospects despite current challenges.

Export demand showed particular weakness, with manufacturers reporting reduced orders from key trading partners including Canada and Mexico amid ongoing trade disputes. The US dollar maintained gains following the data release, reflecting continued investor confidence in the economy's underlying resilience.

Efforts to reach S&P Global for additional commentary on the September figures were unsuccessful by publication time.

Correction: An earlier version of this article misstated the manufacturing PMI figure for August. It was 53.0, not 53.6.