US Business Activity Hits 3-Month High — But Can Tariffs Stall the Momentum?
US Business Activity Accelerates — A Closer Look at the October PMI Flash Data
The U.S. economy showed renewed strength in October 2025 as the Flash U.S. Composite PMI Output Index rose to 54.8 (from 53.9 in September), marking a 3-month high and signaling one of the fastest rates of expansion this year.
The data, released by S&P Global, paints a mixed but mostly positive picture of the economy: growth is picking up, but business sentiment remains cautious amid persistent tariff impacts and rising costs.
For Forex traders, the PMI report provides key clues about the U.S. Dollar (USD) and the broader direction of economic momentum — particularly across the EUR/USD, USD/JPY, and GBP/USD pairs.ts that while prices are still rising, the pace is gradually cooling.
What the Numbers Say
Composite PMI Output Index: 54.8 (September: 53.9) – 3-month high
Services PMI Business Activity: 55.2 (September: 54.2) – 3-month high
Manufacturing Output Index: 52.8 (September: 52.4) – 2-month high
Manufacturing PMI: 52.2 (September: 52.0) – 2-month high
A reading above 50 indicates expansion — so the numbers suggest broad-based growth across both manufacturing and services sectors.
Strong Domestic Demand, Weak Exports
The October report shows that domestic demand is driving U.S. growth. Service providers saw the fastest increase in new orders in 2025, while manufacturers recorded their largest domestic order growth in over 18 months.
However, exports told a different story — both sectors reported declines in overseas orders, with factories seeing the steepest export drop since February. Many firms cited tariff-related trade barriers and reduced demand from China and Europe as key challenges.
This combination of strong internal momentum but weaker external demand gives traders a nuanced view of the U.S. economy — resilient at home, cautious abroad.
Employment and Confidence: Growth, but Fragile
Job creation improved slightly in October, extending the economy’s hiring streak to 10 out of the past 11 months. However, the growth was modest — particularly in manufacturing, where employers struggled to fill positions and faced uncertainty over future demand.
Business confidence took a hit, falling to one of its lowest points in three years. Firms remain wary of policy uncertainty, especially around tariffs and government spending. Still, optimism received a small boost from lower interest rates, which continue to support credit availability and investment.
For Forex traders, declining confidence can signal potential economic slowdowns, which could influence future Federal Reserve policy — and by extension, USD performance.
Prices: Costs Still Rising, But Inflation Slows
While companies continued to face higher input costs from tariffs and wage increases, the pace of price hikes for goods and services slowed to its lowest since April.
Manufacturing input prices remain high but are no longer accelerating rapidly.
Service sector costs climbed for the third straight month, driven by wage pressures.
Firms reported difficulty passing higher costs on to customers due to stiff competition and weaker demand abroad.
This could be an early sign that inflationary pressures are stabilizing — a development the Federal Reserve and Forex market participants will be watching closely.
Manufacturing Outlook: Expansion, But Challenges Remain
The Manufacturing PMI ticked up to 52.2, signaling growth for the ninth time in ten months. Production and new orders both improved, with domestic demand showing the sharpest rise in nearly two years.
However, employment growth weakened to a three-month low, and unsold stockpiles hit record levels. This suggests that while factories are producing more, demand isn’t keeping pace — a potential warning sign for future output.
For traders, this could mean near-term volatility in the USD, especially against export-sensitive pairs like USD/JPY, where industrial performance often affects market sentiment.
The Bigger Picture: Resilient Growth, Clouded Outlook
Overall, October’s data points to steady economic momentum, underpinned by strong consumer demand and a healthy services sector. Yet, trade headwinds, stock build-ups, and uncertain business confidence are casting shadows on the longer-term outlook.
If these trends continue, the U.S. Dollar may stay supported in the near term, especially as lower interest rates boost local spending. But weaker export demand and cautious sentiment could limit upside potential heading into late 2025.
Why This Matters to Forex Traders
In Forex trading, PMI data serves as a leading indicator of economic health. It offers traders a preview of growth trends before official GDP figures are released.
Stronger PMI readings tend to boost the USD, as they imply robust economic performance.
Weaker or uncertain readings can pressure the USD, as traders anticipate slower growth and a more dovish Fed stance.
For Forex trading beginners, think of PMI like an early weather report for the economy — it doesn’t tell the whole story, but it helps you prepare for what’s ahead.
For Filipino Traders and OFWs: Why It Matters
A strong U.S. economy often translates into a stronger USD, which benefits OFW families receiving remittances in pesos. However, it can also make imported goods and fuel more expensive in the Philippines.
That’s why understanding reports like the U.S. PMI is crucial — it helps you see how the global economy affects your wallet, your job, and your trading opportunities.
At GME Academy (Global Markets Eruditio), we break down these complex reports into actionable insights for everyday traders.
Growth Today, Questions Tomorrow
October’s PMI report shows that the U.S. economy is still expanding — but not without challenges. Domestic demand is strong, inflation pressures are softening, and employment continues to rise. Yet, uncertainty over tariffs, export weakness, and policy direction could shape how long this momentum lasts.
For Forex traders, this is a golden window of opportunity — a time to watch market reactions, trade the volatility, and prepare for potential shifts in the Fed’s tone.
Join GME Academy’s FREE Forex Workshop today to learn how to interpret economic indicators like PMI, CPI, and GDP — and use them to make smarter trading decisions.
Learn the skill. Read the markets. Trade with confidence.
