US Business Activity Moderates Further in September

U.S. business activity slowed for a second straight month in September, and though firms complained about tariffs raising costs, they were not raising prices for their goods and services, which bodes well for the inflation outlook.

S&P Global's flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, slipped to 53.6 this month from 54.6 in August. A reading above 50 indicates expansion in the private sector. Activity slowed in both the manufacturing and services sectors.

The survey's measure of prices paid by businesses for inputs increased to 62.6 from 60.8 last month, noting that "tariffs were again overwhelmingly cited as the principal cause of further cost increases."

Its gauge of prices charged by businesses for goods and services fell to 56.0 from 58.3 in August as "firms across both manufacturing and services often reported difficulties passing higher costs on to customers due to weak demand and growing competition."

Though inflation has picked up in recent months, prices have so far not skyrocketed as had been feared when President Donald Trump started rolling out his sweeping tariffs. Consumers have become picky and businesses have been selling merchandise accumulated before the import duties were imposed.

"The number of companies able to hike selling prices to pass these costs on to customers has fallen, hinting at squeezed margins but boding well for inflation to moderate," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "The survey data are nevertheless still indicative of consumer inflation remaining above the central bank's 2% target in the coming months."

The Federal Reserve resumed cutting interest rates last week, lowering the U.S. central bank's benchmark overnight interest rate by 25 basis points to the 4.00%-4.25% range and projected a steady pace of reductions for the rest of 2025.