The US services sector had an extraordinarily rapid acceleration in August 2026, that sent the country's economic activity to its fastest level since April 2022.
According to S&P Global's most recent flash PMI data, a notable slowdown in manufacturing was mostly offset by a strong increase in services. Due to this discrepancy, annualised economic growth in the United States is expected to reach 3.0% in the third quarter, up from 1.5% in the second.
Nearly two-thirds of the way through the current third quarter, the Purchasing Managers' Index surveys released by S&P Global on Friday indicate that overall US economic growth is on course to double the 1.5% annualised expansion rate from the second quarter, according to a report by Reuters.
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S&P Global reported that its Composite Output Index increased from 54.5 last month to 56.0, the most since April 2022, and its Flash Services Purchasing Managers' Index increased from 54.6 in July to 56.8, the best since December 2024. A softening of S&P's manufacturing PMI to a five-month low of 53.2 from 53.9 in July was more than offset by the rise in services.
An increase in activity is indicated by readings over 50. A pair of drivers were absent in August, and economists surveyed by Reuters had predicted that the services PMI would slow to 54.0 from a July pace helped by spending surrounding the FIFA World Cup and the 250th US. Independence Day celebration. The manufacturing index was expected to remain stable at 53.9.
According to a statement from Chris Williamson, chief business economist at S&P Global Market Intelligence, "U.S. business is booming, with firms reporting the fastest output growth for over four years so far in the third quarter as the expansion picked up further momentum in August."
"The survey data for the third quarter are currently pointing to annualised growth approaching 3.0%, up solidly from the 1.5% pace seen in the second quarter," he added.
Services hiring increased by the greatest amount in 19 months due to the strongest rise in new services business since December 2024.
The other side of the slate depicted the ongoing tensions from the Iran War, which have caused the crucial Strait of Hormuz to effectively close, blocking the flow of essential commodity supplies and driving up energy costs. Factory output growth was at its lowest point in 13 months, while order growth, which had surged when the war started over six months ago as businesses tried to bolster stockpiles, fell for a fourth consecutive month.
"As reduced safety stock building and supply delays dampen factory production growth, the service sector is now playing a key role in driving a sustained U.S. expansion, underscoring a dependency on consumer spending and financial services growth," Williamson stated.
Although growth rates for both input costs and selling prices are still high, the report indicated that inflation pressures had considerably decreased. Despite the reduction in August, the third quarter's average cost increase is still marginally higher than the second quarter's, according to the research.
"Price pressures, while fading, also remain elevated and prone to renewed upward pressures should energy prices rise again," Williamson stated.
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