Surge driven by exports and increased demand for domestic U.S. factory goods.
America’s manufacturing sector activity shot up to a 39-month high in August, driven by a surge in domestic and export demand for U.S. factory goods, boosting hiring while putting upward pressure on production costs and selling prices.
S&P Global reported on Aug. 21 that overall U.S. business activity—including both manufacturing and services—grew at its fastest pace so far this year in August, pushing job creation to one of its highest rates in three years as businesses rushed to hire workers to meet soaring demand.
“Companies across both manufacturing and services are reporting stronger demand conditions, but are struggling to meet sales growth, causing backlogs of work to rise at a pace not seen since the pandemic-related capacity constraints recorded in early 2022,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
Output growth over the past two months saw its strongest back-to-back expansion since the beginning of 2022, with America’s factories showing a “marked acceleration” in production after a slowdown in July. Overall output—counting both manufacturing and services—has now grown continuously for 31 months, adding to signs of a strong third quarter.
The data indicate the economy is running at an annualized rate of 2.5 percent, up from 1.3 percent earlier this year.
Many manufacturers reported better sales and demand conditions, with output getting an additional boost from renewed inventory building. Stocks of finished goods soared at their fastest pace since S&P Global began tracking the measure in 2007. The inventory jump was fueled by a combination of expectations of rising demand and safety-stock building amid concerns of supply shortages and future tariff impacts.
Inflationary pressures rose in August, both in terms of input costs and selling prices.
“While this upturn in demand has fueled a surge in hiring, it has also bolstered firms’ pricing power,“ Williamson said. ”Companies have consequently passed tariff-related cost increases through to customers in increasing numbers, indicating that inflation pressures are now at their highest for three years.”
By Tom Ozimek
