U.S. Business Activity Accelerates as Services Sector Surges — Evening Brief – 08.21.26

U.S. private-sector activity accelerated in August as stronger services demand offset slower factory growth, while hiring and business confidence improved, according to preliminary survey data released Friday.

The S&P Global Flash U.S. Composite PMI Output Index rose to 56.0 from 54.5 in July, reaching its highest level since April 2022. Readings above 50 indicate expanding activity, while figures below that threshold signal contraction.

Services drove the improvement. The Flash Services PMI climbed to 56.8 from 54.6, exceeding the 53.8 consensus estimate and marking the sector’s strongest expansion in nearly two years.

New business at service providers increased at the fastest pace since December 2024, while service-sector hiring posted its strongest gain in 19 months, according to S&P Global data reported by Reuters.

Manufacturing remained in expansion territory but weakened. The factory PMI fell to a five-month low of 53.2 from 53.9 in July, missing the 53.7 consensus. Manufacturing order growth slowed for a fourth consecutive month, and output recorded its smallest increase in more than a year.

Across both sectors, companies added workers at the fastest rate since early 2025, while expectations for future activity reached a nine-month high. Input-cost inflation eased to its slowest pace since February, though price pressures remained elevated.

“U.S. business is booming, with firms reporting the fastest output growth for over four years,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Williamson said the surveys point to annualized third-quarter economic growth approaching 3%, double the government’s initial estimate of 1.5% for the second quarter. The Bureau of Economic Analysis attributed that earlier growth to consumer spending, investment and exports.