US flash PMI survey showed the sharpest manufacturing rebound in over three years, as the index jumped from 49.8 to 53.3. Services held firm at 55.4, down slightly from 55.7, lifting Composite PMI to an eight-month high of 55.4. The data point to an economy expanding at a 2.5% annualized pace, well above the average 1.3% seen in the first half of 2025.
S&P Global’s Chris Williamson noted that companies across both sectors are seeing stronger demand, with rising backlogs suggesting capacity constraints reminiscent of the early 2022 supply bottlenecks. This surge has also underpinned a pickup in hirin.
Yet, the survey also showed mounting inflation pressures. Businesses are increasingly passing tariff-related costs through to consumers, and the PMI price indices are now running at their highest levels in three years. Selling prices for goods and services have moved higher, suggesting that consumer inflation will “rise further above the Fed’s 2% target in the coming months.”
For the Fed, the PMI results raise more questions than answers. Far from reinforcing the case for imminent rate cuts, the data place the economy closer to historical conditions that align with policy tightening.
“Combined with the upturn in business activity and hiring, the rise in prices signaled by the survey puts the PMI data more into rate hiking, rather than cutting,” Williamson noted.
