Business activity in the United States gained momentum in August, buoyed by a strong resurgence in manufacturing that helped drive broader economic confidence. According to the latest survey of purchasing managers released late last week, the S&P Global flash Composite PMI rose to 55.4 from 55.1 in July, marking the thirty-first consecutive month of expansion in the private sector. This uptick not only reflects a continuation of steady growth but also highlights the strongest pace of activity seen so far in 2025.
The manufacturing sector was at the center of the improvement. After months of volatility, the U.S. manufacturing PMI surged to 53.3 in August, up from 49.8 in July, signaling a return to expansion territory. This was the highest reading for the sector since May 2022, breaking a long stretch of contractionary pressures. New orders in manufacturing hit their strongest level in a year and a half, suggesting that industrial activity is poised to sustain momentum through the fall. By contrast, the services sector, which has been a consistent driver of post-pandemic growth, continued to expand but at a slightly slower pace, with its PMI slipping to 55.4 from 55.7 in July.
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The data point to a healthier near-term trajectory for the U.S. economy. Analysts at S&P Global Market Intelligence estimate that the current levels of business activity are consistent with an annualized growth rate of around 2.5 percent for the third quarter, nearly double the pace recorded in the first half of the year. Chris Williamson, chief business economist at S&P Global, emphasized that the rebound in manufacturing is helping rebalance growth that had previously leaned heavily on consumer-facing services. With both sectors now contributing, the economy appears more broadly supported heading into the final months of 2025.
Still, the survey was not without warnings. Inflationary pressures are once again creeping higher, driven largely by increased input costs. Firms reported that tariffs on imported goods have been pushing up the prices of raw materials, a burden that many are passing along to customers. The survey found that selling prices across both manufacturing and services rose at their fastest pace in three years. While consumer demand has so far absorbed these costs, sustained price increases risk keeping inflation above the Federal Reserve’s two percent target, potentially complicating monetary policy decisions in the months ahead.
Another bright spot in the August report was employment. The composite employment index climbed to 52.8, the highest level since January, indicating that firms are expanding payrolls to keep up with growing demand. This suggests that the labor market, while cooler than in its immediate post-pandemic peak, continues to serve as a foundation for household spending and economic resilience. Employers in manufacturing, in particular, reported new hiring as they worked to ramp up production in response to rising orders.
The picture that emerges from August’s PMI reading is one of renewed optimism tempered by caution. Businesses are clearly benefiting from stronger demand, especially in industries that had faced prolonged slowdowns. The manufacturing turnaround, in particular, is encouraging for an economy that has leaned on services for much of the past two years. Yet the persistence of cost pressures highlights the delicate balance policymakers face: supporting growth while keeping inflation in check.
For now, the outlook suggests that U.S. businesses are heading into the fall with renewed confidence. If the manufacturing recovery continues alongside steady service-sector growth, the economy could maintain its current trajectory of expansion. However, whether households and businesses can withstand higher costs without cutting back on spending will be a central question shaping the remainder of 2025.
