US business activity raced to a more than five-year high in September, fueled by a surge in new orders, though strong demand strained supply chains and pushed prices higher.
Business activities accelerated in Sep-26, with the S&P Global Flash Composite PMI rising to 58.4 from 56.0, marking its highest level in over five years. The expansion was broad-based, driven by stronger performance across both the manufacturing and services sectors.
The acceleration in the Composite PMI was driven by a sharp rise in the Services PMI to 58.7 from 56.5, alongside a notable rebound in the Manufacturing PMI to 57.0 from 53.9. The survey suggests domestic demand remains robust, with firms reporting stronger new orders, rising output and robust hiring activity, reinforcing the view that the US economy continues to expand heading into 4Q26.
However, the survey also highlighted increasing inflationary pressures. Input costs increased at the fastest pace in four years, primarily driven by higher fuel and transportation costs following the recent increase in oil prices. At the same time, growing backlogs, persistent supply-chain delays and labour shortages point to growing capacity constraints that could keep upward pressure on prices in the coming months.
Looking ahead, the stronger PMI readings suggest that US economic activity momentum remains resilient and indicate limited signs of a near-term slowdown. At the same time, rising input costs, supply constraints and higher energy prices point to renewed inflation risks. While the latest survey supports the view that the Federal Reserve to remain higher for longer, the future path of interest rates will continue to depend on incoming inflation and labour market data, particularly amid persistent geopolitical and energy-related uncertainties. As such, the data are broadly supportive of the US dollar in the near term, although market expectations remain sensitive to developments in inflation, oil prices and global risk sentiment.
