U.S. private sector business activity expands strongly in August - IHS Markit's survey

Preliminary data released by IHS Markit on Friday pointed to a strong upturn in the U.S. private sector business activity in August.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 53.6 in August, up from 50.9 in July, signaling a solid improvement in operating conditions midway through the third quarter. That was the highest reading since January 2019. Economists had expected the reading to increase to 51.9. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. According to the report, growth was driven by quicker expansions in output and new orders.

Meanwhile, the Markit flash services purchasing manager's index (PMI) rose to 54.8 in August from 50.0 in the prior month, signaling the first expansion in service sector business activity since the start of 2020. That was the highest reading since March 2019 as well. Economists had expected the reading to rise to 51.0. According to the report, new business grew firmly due to greater client demand and increased marketing activity, while sales rose solidly, supported by a sharp upturn in new export, and employment growth was the steepest since February 2019.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 54.7 in August, up from 50.3in July, signaling a strong increase in output. Moreover, it marked the sharpest upturn in the U.S. private sector business activity since February 2019.

Commenting on the flash PMI data, Siân Jones, Economist at IHS Markit, noted: “August data pointed to a further improvement in business conditions across the private sector as client demand picked up among both manufacturers and service providers. Notably, the renewed increase in sales among service sector firms was welcome news following five months of declines.”