US business activity accelerated to its fastest pace in more than four years this month, a closely watched survey showed Friday, offering fresh evidence the economy is running hotter than expected even as long-term borrowing costs stay elevated near two-decade highs.
The S&P Global flash US Composite PMI Output Index climbed to 56.0 in August from 54.5 in July, its strongest reading since April 2022. Any figure above 50 signals expansion, and the jump was steep enough that S&P Global's economists said the survey now points to annualized third-quarter growth approaching 3%, roughly double the 1.5% pace recorded in the second quarter.
Services carry the gains
The improvement was driven almost entirely by services firms, where activity expanded at its fastest clip since December 2024 and more than offset a slowdown on the factory floor. The flash Services PMI rose to 56.8, beating economists' forecast of 54 and July's 54.6 reading. Manufacturing told a different story: the flash Manufacturing PMI slipped to 53.2, below the 53.9 consensus estimate, as new export orders and backlogs softened.
Stronger demand pushed companies to add staff at the fastest rate since early 2025, and business confidence about the year ahead climbed to a nine-month high, according to the survey.
US business is booming, with firms reporting the fastest output growth for over four years so far in the third quarter as the expansion picked up further momentum in August.
Chris Williamson, Chief Business Economist, S&P Global Market Intelligence
A rocky week ends higher
The report landed as Wall Street tried to shake off a bruising stretch driven by a bond-market selloff that had pushed the 30-year Treasury yield above 5.3% earlier in the week, its highest level in roughly 19 years. The selloff coincided with the national debt crossing $40 trillion and lingering concern that tariff- and war-related pressures could keep inflation stickier than the Fed would like. The Treasury's move on Wednesday to double its buybacks of longer-dated bonds — to at least $4 billion per operation from $2 billion, starting in September — had already begun cooling yields, and Friday's growth data added to the relief trade.
Bond yields eased further after the announcement, with the 30-year slipping back below 5.25% and the 10-year note easing toward 4.65%. Gold, which had rallied on the same debt and inflation worries, held near a three-month high, while the dollar stayed on the back foot against a basket of major currencies.
The Dow Jones Industrial Average rose 517.80 points, or 0.98%, to close at 53,277.01, according to Yahoo Finance's market wrap. The S&P 500 added 0.43% to finish at 7,674.37, and the Nasdaq Composite gained 0.43% to 26,180.45. Goldman Sachs, Merck and Salesforce were among the session's biggest gainers. Bitcoin climbed above $77,000, lifting crypto-linked stocks along with it.
Even with Friday's advance, all three major indexes closed out the week lower, marking a second straight weekly decline for the Dow as investors continued to digest the surge in long-dated yields and its implications for corporate borrowing costs and equity valuations.
What's next
Markets now turn to two events widely seen as tests of whether the rally that has carried stocks to records this year can withstand higher-for-longer interest rates. Nvidia reports quarterly results on Wednesday, with Wall Street looking for confirmation that AI infrastructure spending remains intact. Days later, Federal Reserve Chair Kevin Warsh is scheduled to deliver his first keynote address at the Jackson Hole Economic Symposium since taking office in May, an appearance investors hope will clarify his approach to monetary policy after a period of limited forward guidance.
For now, Friday's PMI data gives policymakers something to weigh alongside the bond market's unease: an economy that, by this measure at least, is accelerating rather than cooling.
