America's manufacturing sector activity shot up to a 39-month high in August, driven by a surge in domestic and export demand for U.S. factory goods, boosting hiring while putting upward pressure on production costs and selling prices.
“Companies across both manufacturing and services are reporting stronger demand conditions, but are struggling to meet sales growth, causing backlogs of work to rise at a pace not seen since the pandemic-related capacity constraints recorded in early 2022," Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
Output growth over the past two months saw its strongest back-to-back expansion since the beginning of 2022, with America's factories showing a "marked acceleration" in production after a slowdown in July. Overall output—counting both manufacturing and services—has now grown continuously for 31 months, adding to signs of a strong third quarter.
The data indicate the economy is running at an annualized rate of 2.5 percent, up from 1.3 percent earlier this year.
Many manufacturers reported better sales and demand conditions, with output getting an additional boost from renewed inventory building. Stocks of finished goods soared at their fastest pace since S&P Global began tracking the measure in 2007. The inventory jump was fueled by a combination of expectations of rising demand and safety-stock building amid concerns of supply shortages and future tariff impacts.
Inflationary pressures rose in August, both in terms of input costs and selling prices.
“While this upturn in demand has fueled a surge in hiring, it has also bolstered firms’ pricing power," Williamson said. "Companies have consequently passed tariff-related cost increases through to customers in increasing numbers, indicating that inflation pressures are now at their highest for three years."
The upswing in manufacturing comes as President Donald Trump’s economic agenda aims to revive America's factories and turn the United States into a leading manufacturing powerhouse. During the first several months of Trump's second administration, the United States has attracted trillions of dollars in proposed domestic and foreign private investment, mostly in manufacturing.
“Today we’re announcing a $3 billion, five-year plan to build more U.S. products and create more, good American jobs,” Kevin Nolan, president and CEO of GE Appliances, said during an Aug. 13 press conference in Louisville, Kentucky, where the company is based.
“American manufacturing—it’s back. At GE Appliances, we’re showing the way how to bring American manufacturing back in a big way,” he added.
GE Appliances said that it will create more than 1,000 jobs in five southern states, upgrade its 11 U.S. factories with new automation, and boost production across all product lines. The move builds on earlier pledges to shift clothes-washer manufacturing from China to its Kentucky headquarters.