September S&P Global US Flash PMI Shows Growth Colliding With Inflation and Capacity Strain September’s S&P Global Flash PMI looks extremely strong on the surface. Composite activity rose to 58.4, services to 58.7, manufacturing output to 56.7 and manufacturing PMI to 57.0. But underneath the headline is a much more complicated mix of stronger current demand, worsening supply constraints, rising costs and surprisingly little improvement in confidence about what comes next. Growth Is Strong But Not Broad New orders accelerated in both manufacturing and services, but demand was driven principally by the domestic economy. Goods exports continued falling while services exports rose only modestly. That is not a synchronized global demand boom. Unfinished work rose at the fastest pace since May 2022. Supplier delays became the most widespread since July 2022 and companies reported increasing difficulty finding suitable workers. Rising backlogs can reflect strong demand, but they can also signal an economy struggling to process the work already arriving. That matters mechanically because slower supplier deliveries actually raise the manufacturing PMI when that component is inverted. New orders carry a 30% weight, output 25%, employment 20%, supplier deliveries 15% and purchased inventories 10%. All five components helped lift September’s reading. The flash release also leaves out some useful detail. S&P monitors finished goods inventories and quantity of purchases, but does not publish their September readings here. Those would help distinguish healthy production from precautionary inventory building or supply hoarding. The Inflation Signal Is More Troubling The most concerning part of the report is the cost side. • Overall input inflation reached its highest since October 2022 • Services input inflation reached its highest since November 2022 • Fuel and transport costs were major drivers • Wage pressure increased • Manufacturing shortages pushed raw material costs higher Selling prices also accelerated, but remained below the pace seen from March through July because competition limited what firms could pass through, particularly in services. That creates a squeeze. Absorb the costs and margins weaken. Pass them through and consumers lose more purchasing power. The Employment Surge Needs Confirmation Employment reportedly increased at the fastest pace since June 2022 and manufacturing hiring was the strongest since February 2021. But a diffusion index measures how widespread staffing increases are, not how many workers were actually added nationally. In a low hire, low fire economy, modest additions across many firms can still produce a strong diffusion reading. Payrolls, hours worked and JOLTS will matter more than simply taking this surge at face value. Confidence Did Not Follow The Boom Perhaps the biggest contradiction is that future expectations did not improve at all. Manufacturing confidence was only around its long run average while services confidence remained well below trend because of cost of living pressures, higher borrowing costs and political uncertainty. So the same report describing current activity as exceptionally strong is also telling us businesses are not becoming meaningfully more confident about the future. My Take The September PMI shows genuine current strength, but the composition is far less comfortable than the headline suggests. Domestic demand is accelerating while exports remain weak, backlogs rise, supplier delays worsen, fuel and transport costs surge, selling prices lag cost pressure and future confidence fails to improve. That looks less like the beginning of a clean new expansion and more like late cycle growth colliding with an energy, capacity and cost shock. The real risk is that inflation pressure rises precisely while higher borrowing costs and weaker purchasing power are already working through the economy.