The S&P Global US Manufacturing Purchasing Managers' Index came improved to 53.0 in August, compared to 49.8 in July, but below expectations for 53.3 in the Econoday survey of forecasters. A surge in production and a jump in new orders boosted operating conditions. Hiring also rose, but input cost inflation remains significant.

Inventory building in part fueled the upturn in output, with finished goods stocks rising to the greatest degree in over a year amid worries over prices and supply constraints, the report said. This was again linked to tariffs, which served to raise input costs steeply during August and, in turn, sharply drive up typical selling prices.

New orders grew noticeably from July, while production saw its biggest spike since May 2022. Foreign demand remains tepid, with the increased new orders primarily from domestic sources, as international sales declined marginally for the second consecutive month.

As for prices, the sharp rise in input costs continued due to tariffs at the second fastest rate after June. Tariffs were overwhelmingly reported to have pushed up operating expenses over the month and, wherever possible, were passed on to clients through an upturn in selling prices, it said.

Although still lower than June's near three-year record, output price inflation remained substantial and well above trend.

Based on monthly questionnaire surveys of selected companies, the Purchasing Managers' Manufacturing Index (PMI) offers an advance indication on month-to-month activity in the private sector economy by tracking changes in variables such as production, new orders, stock levels, employment and prices across manufacturing industries. The final index for the current month is released roughly a week after the flash.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the Markit PMIs in the U.S. and elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.

Markit originally began collecting monthly Purchasing Managers' Index (PMI) data in the U.S. in April 2004, initially from a panel of manufacturers in the U.S. electronics goods producing sector. In May 2007, Markit's U.S. PMI research was extended out to cover producers of metal goods. In October 2009, Markit's U.S. Manufacturing PMI survey panel was extended further to cover all areas of U.S. manufacturing activity. Back data for Markit's U.S. Manufacturing PMI between May 2007 and September 2009 are an aggregation of data collected from producers of electronic goods and metal goods producers, while data from October 2009 are based on data collected from a panel representing the entire U.S. manufacturing economy. Markit's total U.S. Manufacturing PMI survey panel comprises over 600 companies.