• The S&P Global U.S. Composite PMI posted 54.6 in August, signaling solid expansion across the private sector.
  • The Services PMI reached 54.5, with the sector recording its largest hiring surge since January.
  • Input cost inflation accelerated to one of its fastest paces in over two years, prompting firms to raise selling prices at the quickest rate in three years.

U.S. business activity expanded at a robust clip in August, according to the latest S&P Global PMI data, though the growth was accompanied by a sharp uptick in inflationary pressures that could complicate the economic outlook.

The seasonally adjusted S&P Global U.S. Composite PMI Output Index registered 54.6, firmly above the 50.0 no-change mark and indicative of a solid monthly increase in private sector output. The expansion was broad-based, with the Services PMI Business Activity Index posting 54.5. The Manufacturing PMI, though slightly softer than its preliminary estimate, also signaled strong growth at 53.0, a three-year high.

Underpinning the expansion was the strongest rise in new business received by service providers in 2025. This surge in demand led to the largest accumulation of backlogs of work in over three years, which in turn prompted the most marked increase in service sector employment since January. "The demand picture is undoubtedly healthy," an economist familiar with the data said. "But it's creating significant capacity pressures and cost inflation that is becoming hard to ignore."

Indeed, the report highlighted a concerning inflationary trend. Input costs rose at the second-fastest pace in over two years across the service sector. Companies widely reported that higher supplier prices, increased wage bills, and rising freight costs—partially linked to recent tariffs—were squeezing margins. In response, service providers raised their selling prices at the fastest rate in three years in an effort to protect profitability.

The manufacturing sector faced similar pressures, with input cost inflation intensifying due in part to tariffs. Despite these headwinds, manufacturing output and hiring continued to grow, and business optimism improved from the July low, though it remains subdued by historical standards.

S&P Global analysts noted that while the data points to a strong start to the third quarter, the combination of robust demand and persistent inflation presents a complex challenge for policymakers. Attempts to reach S&P Global for additional comment on the implications of the data were not immediately successful.

The sustained expansion, particularly in the labor-intensive services sector, underscores the resilience of the U.S. economy. However, the acceleration in both input costs and output charges suggests that underlying inflationary pressures are proving stickier than anticipated, a dynamic that will be closely watched by markets and the Federal Reserve alike.