PMIs Reading Explained: Is the US economy picking up speed?

New data from S&P Global’s Purchasing Managers’ Index (PMI) suggests that U.S. business activity saw a surprising acceleration in August, adding to signs of a strong third quarter. The Composite PMI, which combines manufacturing and services, rose to 55.4, up from 55.1 in July. Since any reading above 50 indicates growth, this latest figure points to a private sector that is still gaining traction.

Looking at the details, the manufacturing sector showed renewed momentum, with its PMI climbing from 49.8 to 53.3, moving it out of contraction and into growth. While this is a positive sign for the economy, the services sector cooled slightly, easing to 55.4 from 55.7.

According to economists at S&P Global Market Intelligence, this strong PMI reading is consistent with the U.S. economy expanding at a 2.5% annualized rate—a significant increase from the 1.3% average seen in the first two quarters of the year. Following the news, the U.S. Dollar gained strength, climbing to weekly highs against other major currencies.