American business activity stayed strong in October, and companies raised prices at the fastest pace since 2022

American business started the fourth quarter on solid ground, and it is charging more for what it sells. S&P Global's flash composite PMI, which tracks manufacturing and services together, read 57.6 in October, down from 58.4 in September. September's figure was a five year high. Any reading above 50 means activity is growing.

Manufacturing edged up to 56.0 from 55.9. Services eased to 57.9 from 58.8. New orders rose to 58.2, the highest reading since March 2022, helped by domestic demand, precautionary stock building and export growth. Companies used that demand to raise prices. The survey's output price index reached 59.8, the highest since August 2022, and input costs registered 64.9, as of October 23.

The numbers arrive in a good week for data and a hard one for the Federal Reserve, which meets on October 27 and 28. Economists expect the advance report on third quarter growth, due next week, to show the economy grew at about a 3.0 percent annual rate, driven by consumer spending and business investment in artificial intelligence. The economy has shown no sign of buckling under the oil price shock from the war with Iran. Savings, spring tax refunds, tariff refunds, a strong stock market and corporate profits have cushioned households.

The warning in the survey is about what comes next. Economists told Reuters the inflation fallout from the long Middle East conflict is likely to slow consumer spending this quarter, and price rises as widespread as October's make a quick return to low inflation harder to reach. Business surveys and household surveys are telling different stories at the moment. Consumer sentiment read 48.0 in October, the second lowest figure on record, even as the firms in the S&P survey report their best order books in more than three years.