US business activity hits fastest pace since July 2021 peak

US business activity climbed to 58.4 in September, its highest since July 2021, signaling broad gains in output, orders and hiring.

Composite index reaches 58.4

The flash composite purchasing managers index rose to 58.4, compared with the 50 threshold that separates expansion from contraction, S&P Global said Wednesday. The reading covered both manufacturers and service providers, giving the survey a broad private-sector signal.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said "Business is clearly booming now in both manufacturing and services." Outside the post-pandemic reopening, Williamson said, September's improvement "is the greatest recorded since early 2015."

Services and factories accelerate

Activity at service providers increased to 58.7 in September, the strongest reading since 2021. The employment gauge for services reached its highest level since June 2022, according to S&P Global.

The manufacturing index rose to 57, its best reading since 2022. New orders at factories expanded at the fastest pace since April 2022, while manufacturing hiring was the strongest since February 2021.

Costs tighten the survey message

Employment across the composite survey expanded at the fastest rate in more than four years. Input prices increased at the quickest pace since 2022, with respondents citing higher fuel and transport costs and many firms also reporting rising wages.

Supplier delivery times lengthened by the most since mid-2022, while raw material costs remained elevated, S&P Global said. Williamson said companies also reported problems finding suitable staff, a constraint that can limit output even when orders are rising.

Demand meets margin pressure

The combination leaves companies with a stronger sales backdrop and a more difficult cost base. If firms can pass along higher fuel, transport and wage bills, revenue may hold up while inflation pressure persists.

If customers resist price increases, margins would take more of the strain even with orders expanding. That split matters for manufacturers with freight exposure and service companies where labor costs account for a large share of expenses.

Three paths for September data

If demand remains firm in later PMI releases, the global macro effect would be stronger US private-sector growth and more support for overseas suppliers selling into the American market. For US companies, that path would favor hiring and production plans; for industry, it would keep pressure on capacity and logistics networks.

If fuel, transport and wage costs keep rising instead, the same expansion could carry a less favorable inflation mix. The main uncertainty is whether new orders stay strong enough to absorb those costs after September's readings, or whether delivery delays and staffing shortages begin to restrain output.