S&P Global’s US Services PMI rose to 58.8 in September from 56.5 in August, with new orders hitting a four-and-a-half-year high and job creation reaching its strongest pace since June 2022.
US services sector activity accelerated sharply in September, with business activity expanding at its fastest pace in more than five years as strong demand, rising new orders and improved business confidence pushed companies to increase hiring.
The S&P Global US Services Business Activity Index rose to 58.8 in September from 56.5 in August, marking the fourth consecutive monthly increase and the strongest expansion since July 2021. The index has now signalled growth for six straight months.
The acceleration was supported by a sharp increase in new business. Growth in total new orders reached its fastest pace in four-and-a-half years, with companies reporting particularly strong domestic demand. New export orders also increased for a second consecutive month, although at a considerably slower pace than total new business.
The strength of incoming orders also translated into higher employment. Workforce numbers increased for the third consecutive month, while the rate of job creation was the fastest since June.
However, companies continued to struggle with rising workloads. Backlogs of outstanding business increased for the 19th consecutive month, with the pace of accumulation reaching its sharpest level in almost four and a half years.
The strong expansion came with renewed cost pressures. Input cost inflation accelerated sharply in September after easing to a 16-month low in August, reaching its fastest pace since November 2022. Higher gas and transportation costs, along with rising labour costs, were among the pressures reported by businesses.
More from BusinessOutput prices also increased at a faster pace, with services inflation reaching its second-highest level in just over a year.
The development could complicate the Federal Reserve’s efforts to bring inflation sustainably back to its 2 per cent target.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the September data pointed to a significant acceleration in US economic momentum. He estimated that the strength of services and manufacturing activity indicated economic growth of around 4 per cent in the third quarter, with September alone pointing to growth of around 5 per cent on an annualised basis.
Williamson also said technology companies were recording the strongest growth, while consumer-facing businesses, industrials and healthcare were also seeing faster expansion. Financial services continued to post solid growth.
The broader S&P Global US Composite PMI also strengthened, rising to 58.4 in September from 56.0 in August. The composite reading showed the strongest expansion in business activity in more than five years, with growth accelerating across both manufacturing and services.
The latest data point to a US economy entering the final quarter with strong momentum, but the accompanying acceleration in input and selling prices raises the risk that persistent inflation could remain a challenge for policymakers.
