US business activity lost momentum in September for the second consecutive month, according to a flash reading of S&P Global’s Composite Purchasing Managers’ Index (PMI).
The index eased to 53.6 from 54.6 in August, signalling continued expansion but at a weaker pace. Any figure above 50 indicates growth.
The latest data suggest the private sector is struggling to maintain the momentum seen earlier in the summer.
Both manufacturing and services registered growth, but expansions were softer than in previous months, leading to slower hiring across sectors.
Tariffs drive costs but demand limits pricing power
Tariffs were again cited widely as a key factor pushing up input costs in September.
However, businesses reported that weaker demand and strong competition curtailed their ability to pass on higher costs to customers.
Selling prices rose at the slowest pace since April, suggesting that firms were absorbing more of the burden.
The survey also noted that slower-than-expected sales contributed to the largest rise in factory inventories of unsold goods in the survey’s history.
Confidence improves despite weaker sales
Despite the moderation in activity, sentiment about the outlook strengthened.
Many firms pointed to expectations that lower interest rates could cushion some of the impact from tariffs and broader policy uncertainty.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the latest PMI data still marked the best quarter of 2025 so far for US businesses, with survey readings consistent with a 2.2% annualised growth rate.
“However, the monthly profile is one of growth having slowed from its recent peak back in July, and September saw companies also pull back on their hiring,” he said.
“Softening demand conditions are also becoming more widely reported, curbing pricing power,” he added.
Services lead growth but at slower pace
The services economy remained the main driver of September’s expansion, but growth weakened for a second successive month to its slowest since June.
New business inflows rose at the smallest pace in three months, with softer domestic demand partly offsetting the first rise in export sales since March.
Manufacturing output also rose for the fourth consecutive month, though the pace slowed sharply after a 39-month high in August.
New orders grew only marginally, weighed down by weaker exports amid tariff pressures.
Job creation eases as companies grow cautious
Employment continued to rise in September, marking a seventh straight month of job gains, though the rate of growth eased.
Services firms added staff in response to workloads and improved confidence, but more companies reported difficulty filling vacancies.
In manufacturing, job cuts were more evident, with cost pressures leading to reduced headcounts.
The survey also highlighted divergent trends in backlogs: services saw a further build-up of uncompleted work, while manufacturing recorded the fastest decline in order backlogs since April.
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