U.S. Business Activity Hits More-Than-Five-Year High as September Flash Composite PMI Jumps to 58.4; Input Costs Fastest Since October 2022

U.S. private-sector output accelerated to its fastest pace in more than five years in September, according to flash survey data released Wednesday by S&P Global, even as the survey's gauge of input costs jumped to its highest level since October 2022, according to Reuters via SRN News.

Composite Index Climbs to Highest Since 2021

S&P Global said its flash U.S. Composite PMI Output Index, which tracks both the manufacturing and services sectors, rose to 58.4 in September from 56.0 in August, the highest reading since July 2021, according to Reuters via SRN News and tradingeconomics.com. A reading above 50 signals expansion in the private sector, and September marked a fourth consecutive month of accelerating growth, per tradingeconomics.com.

The gains were broad-based. The flash services index climbed to 58.7 from 56.5, with tradingeconomics.com reporting that the sector posted its steepest rise in output in over five years. The flash manufacturing index rose to 56.7 from 53.1. S&P Global said the composite reading was consistent with the economy growing at around a 5% annualized rate, according to Reuters via SRN News, while the Atlanta Federal Reserve's GDP tracking estimate was running at 5.1%, well above the 1.5% pace of actual growth recorded in the second quarter, per Reuters via wixx.com.

New Orders Surge, But Input Costs Outpace Demand

The survey's measure of new orders received by businesses jumped to 58.2 in September from 55.2 in August, the highest reading since March 2022, with gains reported across both services and manufacturing, according to Reuters via SRN News. The survey's gauge of prices paid by businesses for inputs jumped to 66.4 from 59.9, the highest level since October 2022, also per Reuters via SRN News, with both sectors reporting higher input prices; tradingeconomics.com attributed the increase mainly to higher fuel and transport costs, adding that wage pressures were also noted to have picked up in many cases.

By our calculation, based on the two September readings reported by Reuters via SRN News, the input-price gauge of 66.4 stood 8.2 index points above the new-orders gauge of 58.2, a gap of about 12.3% relative to the input-price reading ((58.2 − 66.4) / 66.4 × 100 = −12.3%). That comparison is interpretation, not an official S&P Global metric, but it illustrates that the survey's cost gauge is sitting further above the neutral 50 level than its demand gauge, even as both point to expansion.

A separate measure of selling, or output, prices also rose, with Reuters via SRN News reporting the sharpest gain in the services sector, while firms' business expectations for the year ahead were unchanged, according to tradingeconomics.com.

Supply Chains Strained, Delivery Times Lengthen

S&P Global said suppliers' delivery times lengthened considerably on average in September, describing the incidence of supply-chain delays as "the most widespread since July 2022," per Reuters via SRN News. The survey also linked high manufacturing raw-materials prices to supply shortages, according to Reuters via wixx.com. Reuters via SRN News attributed the supply constraints mostly to the U.S.-Israeli war with Iran, now in its seventh month, and said further price gains are likely because record-high diesel prices will raise the cost of transporting goods.

Chicago Federal Reserve President Austan Goolsbee said Monday that supply shocks were proving more persistent and that there was evidence strong demand was now compounding the problem, a view Reuters via SRN News said the S&P Global survey supported.

Backlogs Build, Hiring Picks Up

Companies' backlogs of uncompleted orders rose at the sharpest rate since May 2022, which encouraged firms to take on more staff at a pace not seen since June 2022, according to tradingeconomics.com. Reuters via SRN News reported that S&P Global also noted increasing reports of employers struggling to find suitable staff even as hiring accelerated.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said "business is clearly booming now in both manufacturing and services," but cautioned that the growth "is being accompanied by some of the most severe supply chain bottlenecks seen in the near-two-decade survey history if the pandemic is excluded," according to Reuters via SRN News. Williamson added that the accumulation of uncompleted orders "indicates that companies are developing more pricing power, and hence is a worry for the inflation outlook," per the same report.

Policy Backdrop

The survey landed a week after the Federal Reserve raised its benchmark overnight interest rate by 25 basis points to a range of 3.75% to 4.00% and signaled additional hikes in the coming months, according to Reuters via SRN News and Reuters via wixx.com. For historical context, tradingeconomics.com notes the U.S. Composite PMI has averaged 53.72 points from 2013 through 2026, with an all-time high of 68.70 in May 2021 and a record low of 27 in April 2020, placing September's 58.4 reading well above the long-run average but short of the pandemic-era extremes.

Bottom Line

September's flash PMI data point to an economy expanding at its fastest clip in more than five years, driven by a services-sector surge and firming manufacturing activity. But the same survey shows input costs climbing at their sharpest pace since October 2022, supply-chain delays at their most widespread since mid-2022, and a Fed official warning that supply shocks are proving persistent. Taken together, the readings suggest strong demand and mounting cost pressures are running side by side, a combination S&P Global's own economist flagged as a fresh worry for the inflation outlook.