America’s August PMI Points to Broader Expansion, With Pricing Pressures Reawakening

Early August survey readings show the U.S. economy gathering a bit more pace as summer winds down. The preliminary composite PMI rose to 55.4 from 55.1 in July, extending a long run of growth in private-sector activity. The biggest plot twist sits in the factory aisle: manufacturing’s index climbed to 53.3, signaling a return to expansion after dipping below 50 a month earlier. A rebound in new orders—both from domestic customers and international buyers—did most of the heavy lifting, flipping production back into positive territory and lifting sentiment among suppliers.

Services, meanwhile, stayed healthy even as the temperature eased a notch. Travel, leisure, professional services, and healthcare reported ongoing demand, but the breakneck pace seen earlier in the summer has cooled toward something closer to trend. The result is a more even profile across the economy: industry is no longer dragging while consumer-facing sectors remain the growth engine. For GDP math, that balance matters—analysts mapping PMI inputs into nowcasts see third-quarter growth tracking faster than the slow average posted in the first half of the year.

Two friction points stand out. First, costs: firms flagged rising input prices after a calmer stretch in the spring. Some of that reflects supply chains still resetting and the added costs tied to recent tariff policy, especially in intermediate goods that feed into finished products. Second, selling prices: with demand proving resilient and costs rising, more companies reported nudging their own prices higher. While that doesn’t mean inflation is roaring back, it does warn that progress toward the target may be choppier from here, particularly in categories tied to services and trade-sensitive goods.

Hiring is the counterweight. Survey measures of employment improved, and anecdotal comments pointed to businesses filling vacancies that had lingered earlier in the year. That suggests the labor market is cooling more by degree than by direction—less white-hot than 2021–22, but still supportive of household incomes. If that continues, it could underpin consumer spending into the fall, provided price pressures don’t accelerate enough to erode real gains.

Investors will parse these cross-currents as they handicap the next policy steps. Stronger manufacturing and steady services reduce the urgency for rapid policy easing, while the re-acceleration in pricing measures nudges the conversation toward patience. Yet the trend in activity is constructive: an economy that is broadening its base of growth is typically more durable, and early-cycle rebounds in factories often signal better capex and exports down the line. The decisive signals will come from upcoming inflation and spending reports, but for now the flash PMI narrative is clear: growth is improving, jobs are holding up, and prices bear watching.