U.S. business activity grew at its fastest pace in more than five years in September. The S&P Global Flash US Composite PMI rose to 58.4 from 56.0 in August. Input costs rose at the fastest rate since October 2022, driven by fuel and transport expenses, adding to inflation pressure the Federal Reserve is already trying to contain.

Key Takeaways

• The Flash US Composite PMI Output Index reached 58.4 in September, a 62-month high and the fourth consecutive month of faster growth.
• The Flash US Manufacturing PMI jumped to 57.0 from 53.9, the strongest improvement in factory conditions since May 2022.
• The Services Business Activity Index rose to 58.7 from 56.5, a 59-month high.
• Employment rose at the fastest rate since June 2022, and manufacturing payrolls grew at the fastest pace since February 2021.
• Backlogs of uncompleted orders rose at the sharpest rate since May 2022, and supplier delays were the most widespread since July 2022.
• Final September manufacturing data will be published October 1, with services and composite data following on October 5.

The Headline Numbers Show Broad-Based Acceleration

The September flash PMI showed gains in both major sectors. The S&P Global Flash US Composite PMI Output Index, a weighted average of manufacturing output and services activity, rose 2.4 points to 58.4. Readings above 50 indicate expansion. September’s level marks the fastest growth since July 2021.

Services led the increase. The Services Business Activity Index climbed to 58.7 from 56.5, the steepest rise in output in more than five years. Manufacturing also recovered. The Manufacturing Output Index rose to 56.7 from 53.1, its fastest reading since April 2022, after three months of slowing production growth.

The headline Manufacturing PMI, which combines new orders, output, employment, supplier delivery times, and inventories, rose to 57.0 from 53.9. S&P Global said all five components contributed to the gain. New orders in manufacturing grew at the fastest pace in nearly four and a half years.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the data point to annualized economic growth of around 5% and a 4% gain for the third quarter overall. Excluding the post-lockdown rebound, he said the improvement in business activity is the largest recorded since early 2015. “Business is clearly booming now in both manufacturing and services,” Williamson said.

Domestic Demand Is Driving the Growth

The composition of demand matters for business owners reading the September PMI. New order growth reached its highest level since March 2022 in services and since April 2022 in manufacturing. S&P Global said the growth came mainly from the domestic market. Goods export volumes continued to fall, and services exports rose only modestly.

That pattern suggests U.S. growth is being driven by domestic spending, not overseas demand. Businesses selling to U.S. customers are seeing stronger order books. Exporters face a weaker picture, and a stronger dollar in recent sessions could add to that pressure.

Capacity Constraints Are Starting to Show

The September PMI also points to strain on operating capacity. Backlogs of uncompleted orders, which S&P Global treats as a key measure of capacity use, rose at the sharpest rate since May 2022, with increases in both manufacturing and services.

Companies responded by hiring. Employment rose at a pace rarely exceeded since comparable data began in 2009. Service sector payrolls grew at the fastest rate since June 2022, and factory employment rose the most since February 2021. Even so, companies reported growing difficulty finding suitable staff.

Supply chains added to the pressure. Suppliers’ delivery times lengthened sharply again, with delays the most widespread since July 2022. Williamson said the bottlenecks are among the most severe in the survey’s nearly 20-year history outside the pandemic period.

For small and midsize businesses, that combination creates operating risk. Strong demand paired with slower supplier deliveries and a tight labor pool can delay fulfillment, strain customer relationships, and push up overtime costs. Rising backlogs point to revenue ahead but also to delivery commitments that may be harder to meet.

Input Costs Are Rising Faster Than Selling Prices

The price data are the most important part of the September report for inflation. Average input costs across goods and services rose at the fastest rate since October 2022. Respondents mainly cited higher fuel and transport costs, and many also reported rising wage pressure.

Service sector input cost inflation reached its highest level since November 2022. In manufacturing, high raw material prices were often linked to supply shortages, although factory input inflation remained below peaks seen earlier this year during the energy price spike.

Selling prices rose more slowly. Output price inflation picked up from August but stayed below the rates recorded from March through July, and competition held back price increases in services. When costs rise faster than selling prices, margins shrink.

Williamson said growing backlogs indicate companies are gaining pricing power, which he described as a concern for the inflation outlook. That suggests the gap between costs and prices may narrow in the coming months as businesses pass through more of their cost increases.

Markets Read the PMI as Pressure on the Fed

Financial markets reacted quickly. Treasury yields rose after the PMI release, and the 10-year Treasury yield reached 5.135%, its highest level since July 2007. Major stock indexes closed lower on September 23.

The report comes a week after the Federal Open Market Committee voted 12–0 on September 16 to raise the federal funds target range by a quarter point to 3.75%–4.00%, its first increase since 2023. The FOMC statement said inflation remains elevated. The committee’s projections showed 16 of 18 participants expecting another increase this year. The next FOMC decision is scheduled for October 28.

For businesses with variable-rate credit lines or loans tied to the prime rate, the September PMI supports the case for higher borrowing costs. Strong growth and accelerating input costs give the Fed little reason to pause.

Service Sector Confidence Lags Behind Activity

Despite the strong activity readings, expectations for the year ahead were unchanged in September. Manufacturers were more optimistic than service providers, and factory confidence is near its long-run average.

Service sector sentiment remained well below trend. Respondents cited cost-of-living pressures, higher borrowing costs, and political uncertainty. The gap between strong current activity and weak service sector confidence suggests many operators see the current growth as fragile.

The Flash Reading Comes With Caveats

The flash PMI is based on about 80% to 90% of total survey responses, collected September 10–22, 2026, from panels of about 650 manufacturers and 500 service providers. Historically, the average absolute difference between flash and final readings has been 0.4 points for the composite and services indexes and 0.3 points for manufacturing.

PMI surveys measure the breadth of change, not its size. A reading of 58.4 means more businesses reported growth than decline. It does not directly measure output. Official data on gross domestic product, inflation, and employment will show whether September’s survey results hold up.

 

Disclaimer: This article is for informational purposes only and does not constitute financial, investment, business, economic, or tax advice. The PMI data discussed are survey-based indicators and do not directly measure overall economic output or guarantee future economic conditions. Readers should consider additional official economic data and consult a qualified financial or tax professional before making decisions based on economic or financial information.

 

FAQs

What was the September 2026 flash PMI reading?

The S&P Global Flash US Composite PMI Output Index rose to 58.4 in September 2026 from 56.0 in August. It was the fastest private-sector expansion since July 2021.

What does a PMI above 50 mean?

A reading above 50 means more surveyed businesses reported improvement than decline compared with the previous month. A reading below 50 indicates contraction.

Why are business input costs rising?

Survey respondents mainly cited higher fuel and transport costs, along with rising wages. Input cost inflation across goods and services reached its highest level since October 2022.

How does the PMI affect Federal Reserve policy?

Strong growth combined with rising input costs signals inflation pressure, which supports further rate increases. The Fed raised rates on September 16, and its next decision is scheduled for October 28.

When will final September PMI data be released?

Final manufacturing PMI data will be published October 1, 2026. Final services and composite data follow on October 5.