The U.S. economy flashed a split personality in August. S&P Global’s flash PMI released Friday morning showed the services sector blasting to a 20-month high while manufacturing lost momentum, dragged down by higher fuel costs and supply chain tangles. The net result? The Composite PMI hit 56.0 — its strongest reading in 52 months — signaling that American businesses are still expanding at a clip that defies recession calls.
The Numbers
Here’s how the three headline indexes landed versus expectations, per the S&P Global preliminary estimate:- Composite PMI: 56.0 — up from 54.5 in July, a 52-month high. The services engine more than offset manufacturing’s drag.
- Services PMI: 56.8 — up from 54.6, blowing past the 54.0 consensus. Sharpest expansion since December 2024. New business wins surged, backlogs built, and staffing levels rose firmly.
- Manufacturing PMI: 53.2 — down from 53.9, missing the 53.9 consensus. Weakest reading since March. Production growth slowed for a third straight month to its softest pace since July 2025.
Services: The Engine Firing on All Cylinders
The services print at 56.8 wasn’t just good — it was the kind of beat that rewrites narratives. Consensus expected a drop to 54.0. Instead, activity accelerated sharply as clients “made up for the decline in orders after the outbreak of war in the Middle East dampened demand in the second quarter,” according to S&P Global. Backlogs expanded, meaning demand is outstripping current capacity. Confidence among service providers improved for a third consecutive month. On the inflation front, input costs continued rising at a “marked pace” but eased from July’s 14-month high. Even better: output charge inflation — what businesses actually pass on to customers — softened to a six-month low. That’s the kind of disinflation signal the Fed wants to see.Manufacturing: Higher Fuel Costs Bite
The factory side of the economy couldn’t keep up. At 53.2, manufacturing is still expanding (anything above 50 means growth), but the momentum is clearly fading. Production growth hit its weakest level since July 2025. Input purchases fell for the first time since February — a sign purchasing managers are pulling back on orders. The culprits named by S&P Global: higher fuel costs, reduced inventory building, and raw material shortages linked to supply delays. There was a silver lining on the labor front. Factory payrolls expanded at the fastest pace since May — modest but positive. And new orders, while slowing, are still growing.This Week’s Data Cascade
Friday’s PMI data caps an unusually dense week of economic releases. The full picture that emerges is one of resilience with selective soft spots:- Empire State Manufacturing (Monday): Jumped to 20.6 from 15.6, signaling New York factories accelerated in August.
- FOMC Minutes (Wednesday): Released with no major hawkish surprises — markets absorbed them without drama.
- Jobless Claims (Thursday): Fell to 206,000, holding near historic lows and showing employers are still hoarding labor.
- Philly Fed (Thursday): Surged to 47.4 — nearly double the 24.1 consensus — the strongest regional factory reading since 2021.
- Flash PMI (Friday): Services at 20-month high, manufacturing cooling, composite at 52-month high.
Market Reaction
Stock futures pointed higher Friday morning, with traders looking to shake off Thursday’s down session. The services beat provided a counter-narrative to the manufacturing miss, and the 56.0 composite print is fundamentally bullish for earnings expectations. Treasury yields held their midweek rebound, with the 10-year hovering near levels that suggest bond markets are pricing in persistent growth rather than imminent rate cuts. The dollar was poised for a weekly decline — the services strength, counterintuitively, didn’t provide much lift, possibly because markets are reading the factory slowdown as a cap on how aggressive the Fed needs to stay.A 56.0 composite PMI in an environment where Treasury yields are still rising and jobless claims are at 206K doesn’t look like a recession. It looks like an economy running hotter than anyone expected.