U.S. manufacturing is picking up — but so are consumer prices
U.S. manufacturing expanded in August at the fastest pace since 2022, early Purchasing Managers Index (PMI) data shows
Getty Images / Michael Hickey
U.S. manufacturing is expanding at the fastest pace in three years, buoyed by stronger demand.
Suggested Reading
The S&P Global U.S. Manufacturing PMI, an index based on questionnaires sent to purchasing managers at around 800 manufacturers, rose to 53.3 in August. That's up from 49.8 in July, well above market expectations of 49.5. It's the largest monthly rise since May 2022.
Related Content
The figures are a "flash" of the index, meaning they're based on about 85% of usual survey responses.
"Companies across both manufacturing and services are reporting stronger demand conditions," Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
"While this upturn in demand has fueled a surge in hiring, it has also bolstered firms’ pricing power. Companies have consequently passed tariff-related cost increases through to customers in increasing numbers,” Williamson said. Average prices charged for goods and services rose at the sharpest rate since August 2022 as firms passed higher costs on to customers.
Rising selling prices suggests that inflation will rise further above the Fed’s 2% target in the coming months. The PMI data is "more into rate hiking, rather than cutting, territory" according to the historical correlation between these economic indicators and the Fed's policy changes, he added.
Amid stronger demand, Williamson also noted that companies are "struggling to meet sales growth, causing backlogs of work to rise at a pace not seen since the pandemic-related capacity constraints recorded in early 2022." A measure of orders rose to the highest reading since February 2024. Stock building of finished goods has also risen at a survey record pace, he added, partially linked to worries over future supply conditions.
As a result of both inventory-stockpiling and increased orders, manufacturers stepped up hiring, with employment growth at the strongest rate since March 2022, according to the survey.
The manufacturing index's upswing helped raise the composite PMI — which measures both manufacturing and services — to the highest level this year.
A strong PMI reading for August "adds to signs that U.S. businesses have enjoyed a strong third quarter so far," said Williamson. The data aligns with the economy expanding at a 2.5% annualized rate, up from the average 1.3% expansion seen over the first two quarters of the year, he added.