PMI surveys point to solid third quarter US growth, but lower business optimism sends warning signal for outlook

A solid expansion of the US service sector, accompanied by a marked acceleration of manufacturing growth, means the S&P Global PMI data for August point to sign of a strong third quarter for the US economy. Growth was led by rising financial services activity, in part reflecting buoyant stock markets.

But the surveys also revealed a further drop in business optimism about the year-ahead outlook, suggesting companies are cautious about the sustainability of the upturn.

Solid third quarter growth

The S&P Global US PMI Composite Output Index fell from 55.1 in July to 54.6 in August. Although weaker than signaled by the preliminary 'flash' PMI reading, and below that seen in July, the expansion in August was still the second strongest recorded so far this year.

The PMI surveys are consistent with the US economy growing at a solid 2.4% annualized rate in the third quarter so far. That compares with an average 1.3% GDP growth pace over the first half of 2025.

August saw robust service sector growth, but the rate of expansion slowed. Nonetheless, the latest service sector expansion was the second largest seen this year. The big change came from manufacturing, however, where output growth accelerated sharply to the highest since May 2022 to outpace the service sector.

Digging into further detail, the service sector upturn was driven by a further acceleration of financial services activity, which showed one of the largest rises seen this side of the pandemic. In contrast, tech sector and industrial services activity both slowed, though remained stronger than growth of consumer services, where ongoing weak demand was often linked to low household confidence.

In the manufacturing sector, consumer goods output growth jumped to the strongest extent since April 2022, and basic materials output returned to growth for the first time since February.

Optimism sinks further

The brighter news on current economic growth was marred, however, by concerns over future growth prospects and inflation. Business optimism regarding the year ahead outlook has dropped to one of the lowest levels seen over the past three years amid escalating worries over the uncertainty and drop in demand caused by federal government policy, most notably tariffs, as well as the associated rise in price pressures.

Inflation concerns have been fanned by a further steep rise in input costs which have fed through to another marked rise in average charges for goods and services.

Sentiment is running especially low in services, having slipped further in August, but ticked higher in manufacturing amid expectations that trade protectionism will bring benefits. However, we note that current demand for goods, ranging from consumer items to basic materials, was supported in August by reports of renewed inventory building, in turn linked to concerns over tariff prices rises or potential supply issues, which will likely provide only a short-term boost to production.

By sector, by far the darkest outlook is evident for consumer services firms followed by basic materials producers. Tech firms are the most optimistic, closely followed by healthcare.

Access the latest services press release here and the sector PMI release here.

Chris Williamson, Chief Business Economist, S&P Global Market Intelligence

Tel: +44 207 260 2329

chris.williamson@spglobal.com

© 2025, S&P Global. All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.