Core Insights - The strong PMI preliminary value for August indicates robust performance of U.S. businesses in the third quarter, with the economy expanding at an annualized rate of 2.5%, surpassing the average growth rate of 1.3% in the first half of the year [1] Economic Indicators - Both manufacturing and services sectors reported stronger demand, leading to a significant increase in unfinished orders at the fastest rate since early 2022 [1] - Record increases in finished goods inventories are partly due to concerns over future supply conditions [1] Employment and Pricing Power - The rebound in demand has driven a surge in hiring, enhancing companies' pricing power [1] - Companies are increasingly passing on the rising costs associated with tariffs to customers, resulting in inflation pressures reaching the highest level in three years [1] Inflation Outlook - The rise in prices for goods and services suggests that consumer price inflation will likely exceed the Federal Reserve's 2% target in the coming months [1] - The combination of increased business activity and hiring, along with the reported price increases, brings PMI data closer to the "rate hike zone" [1]