US Business Activity Hits Strongest Growth Since 2015 as Input Prices Surge to 2022 Highs

The Quick Take

• US business activity expanded at its strongest pace since 2015, according to the latest PMI composite data.
• Input prices surged by the largest amount since 2022, stoking concerns about persistent above-target inflation.
• The combination of robust growth and rising prices puts the Federal Reserve in a difficult policy position heading into November.

US business activity data showing expansion at the fastest pace since 2015 alongside the largest price surge since 2022 creates a stagflation-lite scenario that complicates the Federal Reserve's interest rate calculus. The Purchasing Managers' Index composite — the underlying data source — captures both services and manufacturing output, and the strength here suggests the US economy is running hot despite elevated borrowing costs. This is consistent with the broader narrative that the US has defied consensus recession expectations through 2025-2026, though the price component now threatens to reignite the inflation debate that central banks believed was largely resolved by late 2024.

For equity markets, the combination of strong growth and surging prices is a double-edged signal: robust activity supports corporate revenue estimates, while elevated price pressures reintroduce the risk that the Fed delays or reverses planned rate cuts. Bond markets are most directly exposed, as yields on 10-year Treasuries face upward pressure if investors price in a higher-for-longer Fed stance. Singapore, as an open economy deeply integrated with US capital markets, would see SGD tightening pressure from MAS if US rates stay elevated, directly affecting the property sector, REITs, and the refinancing costs of Singapore-listed companies carrying USD-denominated debt.

The critical watch point is the Federal Reserve's November FOMC meeting, where the combination of strong activity and accelerating prices will determine whether policymakers reinstate a hawkish tilt after a period of data-dependent neutrality. Watch the US core PCE deflator — the Fed's preferred inflation measure — and whether it tracks the price surge visible in the PMI data or diverges, which would indicate the PMI price signals are a leading indicator that hasn't yet transmitted through to official inflation readings. The macro variable is whether this activity burst is a one-month anomaly or sustained, which the October non-farm payrolls report due in early November will help clarify.

Synthesized from 1 source.