The U.S. economy is expanding faster than many expected. S&P Global's flash U.S. composite purchasing managers index reached 56 in August. That is the highest reading since April 2022. Readings above 50 signal growth, so the index is moving at a healthy pace.
The service sector led the way. Its index moved up to 56.8, the best reading since March 2022. Manufacturing lagged behind.
The factory index dropped to 53.2, a five-month low, as supply bottlenecks and material shortages limited production. Even so, manufacturing stayed above the contraction threshold.
Because services account for most private-sector activity, that strength was enough to offset the factory slowdown. The composite index remained well above the expansion threshold, a sign the overall economy is not losing momentum.
The other big story is jobs. Companies added workers in August at the fastest pace since January 2025, with hiring rising at both factories and service providers. Most of the new jobs came from service-sector businesses.
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Chris Williamson, chief business economist at S&P Global Market Intelligence, said employers are gaining confidence. "U.S. business is booming, with firms reporting the fastest output growth for over four years," he said in a statement. He also said companies are less anxious about tariffs and Middle East instability.
The index matters because it is a leading indicator. When businesses expand, they hire more and invest in equipment. When they contract, layoffs usually follow. That makes the report useful for spotting shifts in the economy before they show up in official jobs reports.
Williamson called the revival in hiring "welcome," noting that employers are increasingly confident.
The purchasing managers index comes from surveys of purchasing managers at private companies. A reading above 50 means more businesses are expanding than shrinking, and a reading below 50 means the opposite. Because the flash version is published ahead of final data, analysts use it as an early signal for where growth and employment might be headed.
Here is the part that matters for your portfolio: price pressures are easing. Input cost increases in August were the slowest since Middle East tensions began, a sign inflation may keep cooling. That is welcome news for anyone who has watched prices climb for years.
Companies also feel more optimistic about what lies ahead. A gauge of future output hit a nine-month high, suggesting business owners expect the good times to continue.
Still, Williamson warned that prices remain high and could rise again if energy costs climb. He said current Middle East tensions "remain a key area of concern for businesses, especially via the impact on supply chains and energy prices."
The bottom line: The economy is growing, hiring is picking up, and inflation pressures are fading. If that holds, investors could see a rare combination of steady growth and cooling prices. Just keep an eye on the energy market. If oil costs spike, the good times could stall.
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