The growth of U.S. businesses in September 2023 reached its highest level in five years. According to preliminary estimates from S&P Global, the composite Purchasing Managers' Index for U.S. manufacturing activity rose to 58.4, up from 56.0 in August. This is the highest level recorded in the past 62 months.
Increase in Service and Manufacturing Activity
This increase in activity in the services sector has been bolstered by a renewed improvement in industrial production. Additionally, employment has surged, with job numbers increasing at a pace not seen in over four years. Chris Williamson, chief business economist at S&P Global Market Intelligence, stated: "To put this growth surge into context, aside from the increase in demand following the reopening of the economy after COVID-19 lockdowns, the latest improvement in business activity marks the largest record since early 2015. Businesses are clearly thriving, both in manufacturing and services."
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Supply Chain Challenges and Inflation Outlook
However, Williamson pointed to some of the "most severe supply chain bottlenecks" in nearly two decades of S&P Global's survey history. Work is increasing, and companies are struggling to find suitable labor for various roles. This backlog could be promising for production and capacity in the coming months, but it also means that companies are becoming more aware of their pricing power, which could lead to concerns about the inflation outlook.
Last week, the Federal Reserve raised interest rates for the first time in 2023 to address rising prices, partly due to the oil supply shock resulting from ongoing conflicts in the Middle East.
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