Growth in U.S. business activity eased for the second consecutive month in September, largely influenced by tariff-related pressures, yet the overall pace remained within expansionary territory, capping off a resilient third quarter.
The flash U.S. Composite Purchasing Managers’ Index (PMI) from S&P Global registered 53.6 for September, down from 54.6 in August. Despite marking a three-month low, the reading stayed comfortably above the 50-point threshold that signals expansion.
S&P Global noted that broad U.S. tariffs continued to drive cost increases for companies. However, weaker demand and strong competitive pressures limited businesses’ ability to pass these costs onto customers through higher prices. Slower-than-expected sales also contributed to a record rise in factory inventory levels, representing the largest accumulation of unsold goods in the history of the survey.
Confidence among business leaders about future prospects improved, in part reflecting expectations that forthcoming interest rate reductions by the Federal Reserve will alleviate some of the pressures from tariffs and broader policy uncertainty.
The U.S. services sector, which constitutes a major share of the nation’s overall output, saw its activity index fall to a three-month low of 53.9, down from 54.5 in August. While the services sector supported the overall composite PMI, new orders in the segment increased at their slowest pace in three months.
Meanwhile, the manufacturing PMI declined to 52.0 from 53.0, with new orders growing only marginally. S&P Global highlighted that this slowdown was “in part due to an increased rate of loss of exports due to tariffs.”
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented that the PMI results were “consistent with the economy expanding at a 2.2% annualized rate in the third quarter.”
He added, “Further robust growth of output in September rounds off the best quarter so far this year for U.S. businesses.”
Williamson also cautioned, “However, the monthly profile is one of growth having slowed from its recent peak back in July, and September saw companies also pull back on their hiring. Softening demand conditions are also becoming more widely reported, curbing pricing power.”
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