U.S. business activity expanded at its fastest pace in more than five years in September 2026, according to preliminary data from S&P Global. Stronger demand supported both manufacturing and services, while employment growth accelerated to a level not seen in more than four years.
However, the stronger economic performance was accompanied by renewed inflationary pressure. Higher energy costs, supply chain disruptions and growing capacity constraints are creating additional challenges for businesses, complicating the Federal Reserve’s efforts to bring inflation under control.
Summary
U.S. private-sector business growth accelerated sharply in September, with the S&P Global Composite PMI rising to 58.4 from 56.0 in August. The reading marked a 62-month high and reflected stronger activity across manufacturing and services.
Employment increased at its fastest pace in more than four years as businesses expanded their workforces to meet rising demand. However, worsening supply chain bottlenecks, higher energy prices and growing backlogs also intensified inflation concerns.
The findings come shortly after the Federal Reserve raised interest rates for the first time since 2023, highlighting the challenge of balancing strong economic growth with persistent price pressures.
U.S. Composite PMI Reaches Highest Level in 62 Months
The preliminary S&P Global U.S. Composite PMI climbed to 58.4 in September from 56.0 in August, representing a significant acceleration in private-sector activity. It was the strongest reading in 62 months, reflecting the fastest expansion since July 2021.
A PMI reading above 50 indicates growth in business activity, while a figure below that threshold signals contraction. The latest reading therefore points to a substantial improvement in operating conditions across the U.S. economy, rather than simply a recovery from weak activity.
The acceleration was driven primarily by stronger services activity, supported by renewed improvement in manufacturing output. S&P Global reported that business growth strengthened for a fourth consecutive month, suggesting that demand remained resilient despite higher borrowing costs and persistent economic uncertainty. S&P Global
Key Economic Indicators
| Indicator | September 2026 | August 2026 |
|---|---|---|
| S&P Global Composite PMI | 58.4 | 56.0 |
| Monthly change | +2.4 points | — |
| Business activity | 62-month high | — |
| Employment growth | Fastest in over four years | — |
| Main growth drivers | Services and manufacturing | — |
Source: S&P Global Flash U.S. PMI, September 23, 2026.
Manufacturing and Services Drive Stronger Economic Growth
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, emphasized the exceptional strength of the latest survey results:
“To put the growth surge in context, barring the spike in demand following the opening up of the economy after the COVID-19 lockdowns, the latest improvement in business activity is the greatest recorded since early 2015. Business is clearly booming now in both manufacturing and services.”
The improvement reflects stronger demand across the private sector, with manufacturers and service providers reporting rising activity. Companies also increased hiring to manage growing workloads, pushing employment growth to its highest level in more than four years.
The combination of stronger output and faster recruitment indicates that businesses are expanding their operations rather than relying solely on existing capacity. However, the pace of growth is also creating new pressures as companies struggle to secure enough workers and supplies to meet customer demand.
Supply Chain Bottlenecks Raise Inflation Concerns
Despite the strong economic performance, the September survey revealed growing strains on production capacity and supply chains. Williamson highlighted some of the most severe bottlenecks recorded in the survey’s nearly two-decade history, while businesses reported difficulties finding appropriately qualified employees.
Order backlogs have continued to expand as demand exceeds companies’ immediate ability to deliver goods and services. Although this could support future production and investment, it also increases the likelihood that businesses will pass higher operating costs on to their customers.
Williamson warned that growing backlogs are making companies more aware of their pricing power, adding that this development “is a worry for the inflation outlook.”
Energy prices represent another important source of pressure. The ongoing conflict in the Middle East has disrupted oil supplies, raising fuel and transportation costs for businesses already dealing with capacity constraints and labor shortages.
Federal Reserve Faces a Strong Economy and Persistent Inflation
The survey results arrive shortly after the Federal Reserve raised interest rates for the first time since 2023. On September 16, the central bank increased its benchmark rate by 25 basis points, bringing the federal funds target range to 3.75%–4.00%.
The Fed said the decision was intended to support a return to its 2% inflation target while maintaining its commitment to employment and economic stability. Policymakers also acknowledged that domestic spending remained resilient and business investment was robust despite heightened geopolitical uncertainty. Federal Reserve
The latest PMI figures illustrate the challenge facing monetary policymakers. Stronger business activity and rising employment suggest that the economy is maintaining considerable momentum, but growing price pressures could make it more difficult for inflation to return to the central bank’s target.
What the Latest PMI Means for the U.S. Economy
The September report presents a mixed picture for investors and policymakers. Business activity, manufacturing output and employment are all improving, indicating that the U.S. economy remains resilient despite higher interest rates and volatile energy markets.
At the same time, supply constraints and stronger pricing power suggest that economic growth may continue to generate inflationary pressure. Investors will therefore be watching whether future PMI releases confirm sustained expansion without a further acceleration in business costs and selling prices.
For the Federal Reserve, the central question is whether stronger economic activity can coexist with a gradual reduction in inflation. The September survey suggests that growth remains robust, but restoring price stability could require continued attention to both demand and supply-side pressures.
