By Christopher Combs, Chief Investment Officer, Silicon Valley Capital Partners
September 24, 2026
Recent business surveys are sending an increasingly consistent message: U.S. economic activity entered the final weeks of the third quarter with considerable momentum. Manufacturing indicators have strengthened, new orders are expanding, and broader measures of business activity have accelerated to their strongest levels in more than five years.
At the same time, the reports contain an important counterweight. Input costs and supply-chain pressures are increasing, suggesting that stronger economic growth is arriving alongside persistent inflationary pressures.
Here are three key takeaways.
- Kansas City Fed Survey Points Toward Continued National Manufacturing Expansion
The Federal Reserve Bank of Kansas City’s September manufacturing survey provided another indication that U.S. factory activity remains firmly expansionary.
The Kansas City Fed surveys manufacturers throughout the Federal Reserve’s Tenth District, which includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming and portions of Missouri and New Mexico. Participating firms are asked whether measures such as production, orders, shipments, employment, inventories and prices have increased, decreased or remained unchanged compared with the previous month. Those responses are converted into diffusion indexes that provide a timely measure of the direction and breadth of manufacturing activity.
In September, the district’s composite manufacturing index increased to 14 from 10 in August, reaching its highest level since July 2022. More importantly, the strength extended beyond supplier delivery times.
The new-orders index increased to 24 from 16, its highest level since December 2021. Production increased to 20 from 17, while shipments rose to 21 from 17. The average workweek also increased sharply even as the employment index remained at zero.
Taken together, these readings suggest manufacturers are producing more and receiving stronger demand without a corresponding surge in headcount—potentially consistent with improving labor productivity.
There is, however, a significant inflationary element. The raw-material prices index increased to 68 from 55, while the prices-received measure rose only modestly to 37. That widening gap suggests some manufacturers are experiencing higher input costs faster than they can pass those costs through to customers, potentially putting pressure on margins.
Bloomberg Economics’ conversion of the four available regional Federal Reserve manufacturing surveys to an ISM-comparable framework produced an average reading of approximately 55, broadly consistent with another solid national manufacturing reading. Regional surveys, however, are not inputs into the national ISM survey and historically provide a better indication of its general level than its precise month-to-month movement.
- U.S. Business Activity Accelerates to Its Fastest Pace in More Than Five Years
The broader economy is showing an even stronger expansion.
S&P Global’s preliminary September survey showed its U.S. Composite PMI Output Index rising to 58.4 from 56.0 in August, the strongest reading since July 2021. Outside the unusual reopening surge following the pandemic, S&P Global characterized September’s improvement in business activity as the strongest recorded since early 2015.
The S&P Global PMI is constructed from monthly surveys of private-sector businesses. Companies are asked whether important operating conditions—including output, new orders, employment, inventories, supplier delivery times and prices—have improved, deteriorated or remained unchanged compared with the previous month. These responses are converted into diffusion indexes designed to provide an early indication of changes in economic activity.
September’s strength was broad-based.
The preliminary Services PMI reached 58.7, while the Manufacturing PMI increased to 57.0. New business strengthened and companies increased hiring as they attempted to meet rising demand. S&P Global reported that overall payroll growth reached its strongest pace in more than four years.
The economic message is encouraging: demand appears strong across both manufacturing and services heading into the fourth quarter.
But there is another side to the story. Companies are reporting higher fuel, transportation and labor costs as well as longer supplier delivery times. S&P Global reported that input-cost growth reached its strongest pace in nearly four years.
The combination is therefore unusual but important: stronger growth, stronger employment and stronger demand are occurring alongside renewed cost pressures.
- Understanding PMI: A Real-Time Window Into the Economy
The Purchasing Managers’ Index, or PMI, is one of the most closely followed leading indicators of economic activity because it captures changes inside businesses well before many official government statistics become available.
PMI surveys generally ask business executives whether conditions improved, remained unchanged or deteriorated compared with the previous month. Those responses are transformed into diffusion indexes.
The basic interpretation is straightforward:
Above 50 = expansion
50 = broadly unchanged
Below 50 = contraction
The farther an index moves above or below 50, the broader or stronger the reported change generally is.
Importantly, a PMI reading of 58 does not mean the economy grew 8% or that 58% of businesses expanded. It is a diffusion index measuring the breadth and direction of change across surveyed companies.
There are also multiple PMI surveys. S&P Global’s September flash reading provides an early estimate based on responses collected before the month has ended. The Institute for Supply Management produces separate national Manufacturing and Services PMI surveys using panels of purchasing and supply executives.
The latest completed ISM Manufacturing PMI was 54.6 in August, marking the eighth consecutive month of manufacturing expansion. ISM constructs its Manufacturing PMI from five equally weighted components: new orders, production, employment, supplier deliveries and inventories. The September ISM Manufacturing report is scheduled for release October 1.
When the different surveys are considered together, the message is becoming increasingly consistent. The Kansas City Fed survey indicates strengthening factory orders and production. S&P Global reports accelerating activity across manufacturing and services. And the most recent national ISM data already show manufacturing operating comfortably above the 50 expansion threshold.
Bottom Line
The September surveys provide some of the strongest evidence this year that U.S. economic momentum remains substantial heading into the fourth quarter.
The most notable development is not any single headline number but the breadth of the expansion: manufacturing production, new orders, services activity and employment are strengthening simultaneously.
The principal risk embedded in the same reports is inflation. Higher energy, transportation, labor and raw-material costs suggest that stronger demand is colliding with renewed supply constraints.
For investors, the emerging economic picture is therefore one of strong growth accompanied by persistent cost pressure. The next important confirmation will come with the September ISM Manufacturing PMI on October 1.
References
Federal Reserve Bank of Kansas City (2026), Tenth District Manufacturing Survey, September 2026.
Institute for Supply Management (2026), August 2026 ISM Manufacturing PMI Report, 1 September 2026.
S&P Global Market Intelligence (2026), US Flash PMI Signals Fastest Growth for Over Five Years in September, 23 September 2026.
Bloomberg Economics (2026), Sacher, A., US React: KC Factory Survey Points to Solid National ISM Print, 24 September 2026.
Bloomberg News (2026), Sparshott, J., reporting on S&P Global September U.S. PMI data, 23 September 2026.